Bitcoin is a cryptocurrency that is decentralized in nature and isn’t related to national governments or central authorities’ rules and regulations. Undoubtedly, thousands of cryptocurrencies are available in today’s time, but still, bitcoin is one of the best and most widely used cryptocurrencies. Similar to traditional currencies, bitcoins are a store of value and can be used as a medium of exchange. You can invest in bitcoin through this article.
To circulate bitcoin more in the market, bitcoin can be subdivided into eight decimal values, and it is considered as the smallest unit of bitcoin or Satoshi. The source code of bitcoins is designed in a way to allow users to subdivide it further to appreciate the currency value. Bitcoin is the only currency that is most versatile and can be used to sell and purchase goods from all the cryptocurrencies. With its wide acceptance in the market, businesses and companies have started accepting bitcoin payments.
The only major problem associated with the bitcoin network is its wild value fluctuations. Because of its versatile market, it is not considered a legitimate investment as compared to other stable traditional currencies. But the investors are trying to learn about the market of bitcoin through fundamental and technical analysis and are making investments in bitcoin.
The working of Bitcoin
Bitcoin is a digital currency that is made up of source code. The source code of bitcoin uses highly complicated algorithms that are required to prevent duplication or forged bitcoin units. The underlying principles of the source code of bitcoin are called cryptographic principles. The cryptography ensures unauthorized access of bitcoin, and these are completely based on principles of computer engineering and advanced mathematical principles. It is impossible to decode or break the source code and duplicate or manipulate the supply of this digital currency.
There are many new cryptocurrencies in the market and have preceded bitcoin, but bitcoin is considered the first modern digital currency. This is due to the excellent key features offered by bitcoin as compared to other currencies. Let us have a look at some of the features of bitcoin:
Bitcoin Exchanges
Bitcoin exchanges are the places where users of bitcoin can exchange their crypto units for getting fiat currencies at different exchange rates. Users can also buy bitcoins from bitcoin exchanges. Bitcoin exchanges tend to deal in almost all the cryptocurrencies, but all exchanges have different exchange rates. The bitcoin exchanges tend to charge around 1% of the transaction value to exchange bitcoins or make transactions.
The main task of exchanges is to make sure that bitcoin’s market remains liquid as it tends to set the value of bitcoin according to traditional currencies.
User Anonymity
Bitcoin source code is protected by cryptographic principles to provide privacy protection to transactions of bitcoin. The entire system of bitcoin is designed to record the bitcoin transactions publicly but hide the real identity of bitcoin users. In order to send and receive bitcoins, users need to know the bitcoin wallet address of other users and protect their wallet using the private keys. Bitcoin users tend to handle their wallets using the pseudonymous name. The users must use additional protections to hide their name and flow of bitcoin.
Blockchain
The bitcoin network is based on blockchain technology for its functioning. The blockchain is designed in a way to record all the transactions of bitcoin that happen every single day. In simpler words, it is a public distributed ledger that records bitcoin transactions by gathering them in groups called blocks. The transactions need to first verify by special computers known as miners that serve two purposes of bitcoin, including creating new bitcoin units and verifying the bitcoin transactions.
The new transactions of bitcoin take place every single day, and therefore the public ledger tends to grow with time. The miners keep on doing their work of verifying the transactions and adding them into the blockchain by gathering them into blocks. There is no specific length of blockchain, and it is not expected to stop growing.
The miners compete with each other to solve bitcoin transactions, and one who solves the 1MB of transactions gets bitcoins as a reward.