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What is Bitcoin and How Does it Work

What is Bitcoin and How Does it Work with

Everything you would like to know about Bitcoin

Introduction

In an age when the Internet spread and revolutionized in all aspects of life, it was followed by another revolution which is electronic banks and financial movement that began to spread on the Internet, and had a significant impact on the course of financial affairs in the real world dramatically, and electronic banks remained in control of Online financial transactions until the morning of January 3, 2009, where a new currency has emerged, which has never been pledged by the human being. A new currency called Bitcoin.

Definition

Bitcoin is a currency that can be compared to other currencies such as the dollar or the euro, but with several fundamental differences, most notably that this currency is a fully electronic currency trading online only without a physical presence. They are different from conventional currencies, with no central regulatory body behind them, but can be used as any other currency to buy online or even convert them into conventional currencies.

What is Bitcoin and how it works?

For those who do not know Bitcoin, it is a pseudo-encrypted virtual currency known as ” Satoshi Nakamu To “, and is somewhat similar to known currencies of the dollar, euro and other currencies, but the different is that they are fake. Any transactions on the Internet and have no physical presence, and encrypted, the sales and purchase carried out or even knowledge of the currency cannot be tracked, and to simplify the mechanism of work of this currency I will explain further.

It is considered to be a cryptocurrency, meaning that it is based on the principles of encryption in all its aspects. It is also the first and most famous currency, but it is not the only encryption currency currently on the Internet. There are currently at least 60 different cipher currencies, including at least 6 currencies that can be described as prime depending on the number of users and the structure of each network, as well as the places where these citations can be exchanged and bought for other currencies. With the exception of the Ripple currency, all current currencies are based on the principle of the currency of the property itself, since a currency in an open source configuration can be reproduced and modified, and then a new currency is launched.

Incorporation of Bitcoin

A person who called himself the symbolic name of Satoshi Nakamoto put forward the idea for the first time in a research paper in 2008, describing it as an electronic monetary system that relies on peer-to-peer, Direct dealing between one user and another without an intermediary. The purpose of this currency, which was first floated in 2009, is to change the global economy in the same way that the Web has changed the methods of publishing, says the authors. In 2016 Australian businessman Craig Stephen Wright announced that he was Satoshi Nakamoto in advance of a technical guide on it but his evidence was easily falsified.

 

Series blocks

To ensure that the conversion process is good, it allows you to maintain a log of accounts in which all actions on the network are called block. All nodes on a network share this record through a system based on the Bitcoin protocol. A string of blocks contains all the actions that were performed using Bitcoin, which allows you to know the balance each address has on this network. This concept is called a description of the chain of interconnect between the blocks, where each block contains the cluster haze that precedes it and continues to reach the first block called the ” genesis block “. Configuring the string in this way makes the task of changing any block after a certain period of time difficult to create. Changing any block requires changing all subsequent blocks because of the need to recalculate each block to update the previous cluster hash value. It is this property that makes the problem of recurrent spending of the same currencies extremely difficult for Bitcoin, and even the chain of blocks can be considered the backbone of which a coin cannot stand without it.

 

Anonymous

It is common knowledge that the currency of the house is characterized by a high degree of anonymity. In principle, it is true that all you need to send some of the Bitcoins to someone else is his address. However, since every conversion is recorded in the KFH register, although you do not know the identity of the owner of any address, you can know how many bytes are in the possession and what addresses are sent to your home. If someone has explicitly declared that they have certain addresses, you will be able to find out what addresses they sent to your home and what addresses they sent to your home. Detecting your Bitcoin address is not excluded, as you will need to give it to others if you need to send some money to it. Different addresses are recommended for different conversions to maintain a certain level of anonymity, although there are many who do not. Technically, the source of some suspicious transactions on the KFH network is still possible. Tracing transfers can be traced back to a well-known address, where it is sufficient to perform counter-checks until the suspicious account holder arrives. It is true that the amount of data on all transfers is huge, but the power of computers is increasing and the traceability of these processes is very high. It is even more obvious that tracking petty thefts is much easier than tracking money theft on its paper body.

 

Bitcoin anonymity

Currently, the owners of Bitcoins have little choice to spend their money, which makes some of them replace them for traditional currencies. This is usually done through special platforms where the Bitcoins are replaced with other users. It seems that in case you wish governments to know the identities of the owners of some accounts, it only can see the codification of transfers rather than prevent it, where it will be possible to know the owner of each account name once you want to replace holdings in exchange for conventional currencies, which represents a starting point for tracking Stolen money.

How does Bitcoin work?

Imagine that there is a room with surveillance cameras watching every small and large amount of money being transferred in your life and recorded it, and in this room there are five transparent shops so that the coins can be seen inside clearly, and each of the proceeds of the five owned by someone standing outside the room with a code to open the proceeds, and this person wants to buy something, then he goes to the dealer and gives the trader the code of the proceeds, then the dealer enters the room and his face is covered so that it cannot be seen and take the money and put it in his possession in the same room and come out, and so these cameras have recorded that process of transferring a sum of money, but do not know the proceeds neither was of gold or money. How or to where it was gone!

 

But why Bitcoin?

 

Everything has its pros and cons, and the pros of this currency is summarized in three sentences:

 

First is low fees and speed:

 

Instead of the need for an intermediary between you and the trader to transfer money, this broker deducts a percentage of the money, with the presence of the currency of the Bitcoin, this process does not exist, because the currency has not moved, but the currency code is extracted from your portfolio and entered into the merchant’s wallet, The process takes place between you and the merchant without an intermediary and is called P2P or peer to peer.

 

Second is Confidentiality:

 

Buying and selling cannot be monitored or interfered with. This is a positive point for those who like privacy and it reduces the control of the government and banks on the currency.

 

Third is Global:

 

It is not linked to a specific geographical location can be dealt with and it is your local currency. And the most important thing in this currency is that it has no (officer or link) that is true and this cancels the control of the central banks on the printing of money that caused inflation and high prices, and the reason that makes this currency protected from inflation is limited number has put Satoshi Nakamoto plan With 21 million coins to be produced by 2140, and their limited number gave them a great value in the market, from a mere six cents to more than $ 1,000 and then to about $ 600. The big sudden changes are that they are unstable. You can track their price on the coindesk website.

 

But where do people get the currency from?

 

People get it in several ways, but the main way is the mining process:

 

Two images

The process of mining is similar to the process of mining gold in mines either individually or in groups, but in the process of mining Bitcoin, replaces the drilling tools with computers and the more processing capacity, the ability to extract coins faster, and replace mine Gold is a program to solve complex equations that carry the currency codes. Those who find the currency code become the currency of its currency. There are many around the world who became obsessed with this currency and booked full servers operating throughout the day to solve equations and extract coins.

Although this currency is a fake, some companies such as Titan Bitcoin are working to get this currency into reality in the form of coins of the same value and carry ID of 8 digits, but this is lost by the most important features are confidentiality and speed and low fees.

 

The disadvantages of this bitcoin lie in some of its most important features:

 

The first of its disadvantages is the confidentiality of the currency and encryption, as this is an advantage, but it is reflected in some of the disadvantages in that it gives some easy to suspicious operations on the Internet, especially in the deep network and the best example is the site of silkroad, which was dealing with drugs, but must bear in mind that this site was at the beginning of the life of the currency and its closure did not pose a significant risk to the currency, but it remains a problem.

 

And for those who do not know the deep network you can check videos online.

 

The second is doubts about the mining process. No one knows what equations the machine is solving. Some have questioned the existence of an organization that works in secret to solve equations that may need hundreds of years in a short time to divide equations on servers.

 

And the third is in the identity of Satoshi Nakamoto unknown, no one knows whether a man or a woman or a group of people, and do not know how much this character own of the currencies. If a country is hiding behind this figure and the largest share of it will cause the change of power centers on the map.

 

It is also worth noting that not all economists and experts stand in the ranks of this currency, some have fears that it is just a bubble and will explode and economic crises will follow it.

 

In the end, the reason for my writing this article is not to publicize the currency or the stimulus to buy it, but rather to give clear information about the whole process, so be careful and If you are going to do something, it is your own risk.
In light of the economic inflation that is taking place in the world due to the excessive printing of paper money, it made the economic collapse a matter of time, so this currency may be next to gold as the last resort of the trend. All I hope is that I gave some helpful information about Bitcoin.

2 Comments

  1. Thanks for the great article about bitcoins. I have always wondered what they were and how they work. I know they were cheap to buy when they first came out but now are very expensive. I wish I would have known about them when they first came out. I would have definitely bought some.

    • Bitcoins are an amazing invention, and it is just incredible how it works.

      Even from one year ago the value doubled and it is around 2700 USD right now (it was 1400USD).

      Do you know you can use Bitcoins as investment, but also you can MAKE IT YOURSELF, like your own money tree.

      We will cover all the aspects from Bitcoin use and investment aspects, so keep it up, follow us and you will see many interesting stuff!


      Cheers,

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