what is a bitcoin: How does the Bitcoin work Ever since the barter system was originally introduced by the Mesopotamia tribes around 6000 BC, we have witnessed different types of goods/currency exchange.Paper cash quickly came into place at the onset of the 18th century.With the commencement of the Internet age, various efforts have been made to take the currency exchange into a digital form. It has to be said that those efforts have been well converted and now over 95% of the entire cash in the world is digital, leaving only physical cash to be a mere 5% of the entire money in the world!
Although there have been many companies to have tried their hand at developing a new source of the digital currency exchange system, it is fair to say that PayPal holds a major share in this regards.
One of the fairly recent additions to these networks in digital currency exchange is Bitcoin. A lot has been said and written on the Internet about Bitcoins and it is still one of the most mysterious types of currency exchange, which people have a tough time holding a grasp of. Hence, our topic of interest and let’s dive deep right into the nuances of Bitcoin and clear some of the benefits and uses of this new digital form of currency exchange.
What is bitcoin?
Bitcoin is a digital payment currency that utilizes cryptocurrency (a digital medium of exchange) and peer-to-peer (P2P) technology to create and manage monetary transactions as opposed to a central authority. The open source Bitcoin P2P network creates the bitcoins and manages all the bitcoin transactions.
Often referred to as “cash for the Internet,” Bitcoin is one of several popular digital payment currencies along with Litecoin, Peercoin, and Namecoin. When the word Bitcoin is capitalized, it usually refers to the software and systems used for bitcoin (in lowercase it means the actual currency).
Invented originally by someone under the alias of Satoshi Nakamoto, it is still unclear who is the exact founder of Bitcoin. Various news outlets including The New York Times, Newsweek, Forbes, and Gizmodo have made different headlines claiming distinct people as being the founder of Bitcoin. Now that we understand that the origins of the creator of Bitcoin are pretty bleak, lets learn what exactly does a Bitcoin do and how is it different from other forms of digital online currency exchange services?
To begin with, if you have ever made use of digital online currency exchange, you must be aware of the transaction fees charged by these middlemen.
One of the distinctive features of digital currency exchange services is their transaction fees and other charges. The most important aspect of Bitcoins that differentiates it from other digital currency exchange services is that it does not charge any kind of transaction fees.
How Exactly does Bitcoin Currency exchange work
While Bitcoin seems an amazing form of digital currency with its startling strengths, how does it exactly work?
Bitcoin is a form of decentralized form of currency, as deemed by the U.S. Treasury. Bitcoin does not base upon a central authority or a bank and instead is carried out by the network of its entire community (Decentralized network).
Considering Bitcoins as a form of digital currency, these could be bought at different Bitcoin currency exchange networks. These networks allow users to buy and sell Bitcoins from their chosen form of currency including USD, Euros, INR and more.
These newly bought Bitcoins are now stored in your digital wallet, which could be accessed over mobile or desktop devices. You can also send or receive Bitcoins from other users with a simple tap of the button.
The Bitcoins could also be used to make purchases online at outlets which currently accept them. This is a simple explanation of how the Bitcoin works.
Now, how exactly are these Bitcoins generated and managed and issued if there is no involvement of a central agency or banks?
For the purpose of understanding how the Bitcoin network is managed, we now have to introduce a new sect of people known as ‘Miners’ on the network.
Miners are individual groups of people who lend their computing power and capacity to the community and to keep the integrity of transactions on the network in check. These Miners verify the transactions on the network and are rewarded with the newly generated Bitcoins for their efforts.
Is Bitcoin Legal?
It is fair to say that Bitcoin operates off the physical grid and doesn’t involve any kind of central agency or the banks, is it still legal?
The answer would be, it depends on user location.
The legality of Bitcoin depends primarily on your location of interest and the purpose accordingly. Given that Bitcoin is a form of decentralized digital currency, it is illegal to use Bitcoins in many countries and some governments allow its use.
- The United States, for example, have now declared it as a commodity.
- Indian Deputy Governor of the Reserve Bank of India has stated that they have no plans to legalize Bitcoins in India.
- Bangladesh government has stated that “anybody caught using the virtual currency could be jailed under the country’s strict anti-money laundering laws”.
- Some other countries are particularly neutral about the usage of Bitcoins.
- Japan has started accepting Bitcoin as a payment option.
So, it makes sense that you double-check your local government laws pertaining to Bitcoins before making use of them.
What is a ‘Cryptocurrency’
A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency and arguably its most endearing allure is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
BREAKING DOWN ‘Cryptocurrency’
The anonymous nature of cryptocurrency transactions makes them well-suited for a host of nefarious activities, such as money laundering and tax evasion.
The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym, Satoshi Nakamoto. As of September 2015, there were over 14.6 million bitcoins in circulation with a total market value of $3.4 billion. Bitcoin’s success has spawned a number of competing cryptocurrencies, such as Litecoin, Namecoin, and PPCoin.
Cryptocurrency Benefits and Drawbacks
Cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers.
Central to the genius of Bitcoin is the block chain it uses to store an online ledger of all the transactions that have ever been conducted using bitcoins, providing a data structure for this ledger that is exposed to a limited threat from hackers and can be copied across all computers running Bitcoin software. Many experts see this block chain as having important uses in technologies, such as online voting and crowdfunding, and major financial institutions such as JP Morgan Chase see potential in cryptocurrencies to lower transaction costs by making payment processing more efficient.
However, because cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist. Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.
Cryptocurrencies are not immune to the threat of hacking. In Bitcoin’s short history, the company has been subject to over 40 thefts, including a few that exceeded $1 million in value. Still, many observers look at cryptocurrencies as hope that a currency can exist that preserves value, facilitates exchange, is more transportable than hard metals, and is outside the influence of central banks and governments.
Source: The Joy of Tech & Invunocoinestopedia
Here I’m listing down few websites that you can use to buy and sell Bitcoin. I have listed these websites based on their popularity & ease of use. One thing that I have noticed with almost all of the Indian Bitcoin exchange websites is their pricing differs in real time. So I would suggest that you don’t put all of your eggs in one basket. Instead, purchase Bitcoin from different places.
here are some of the best sites to buy Bitcoins Instantly
- unocoin Unocoin is the first website that I recommend you to get started with if you have never purchased Bitcoin before
- changelly : You can buy Bitcoin & few other coins instantly. Highly recommended
- etoro you can buy and sell Bitcoin and Cryptocurrency Using your Debit/Credit card
If you find this list useful, do share it with your friends on Facebook & Twitter. If you know of any other Indian Bitcoin websites that should be on the list, let me know in the comment section below