Bitcoin has made quite a hype these days. Some countries are considering it a new age of currency exchange, while some of the countries consider Bitcoin exchange portals as a fraud. So the question is “what is Bitcoin?”
A bitcoin is a non-fiat cryptocurrency that works on the principle of cryptography for generation and regulations of currency units. Invented by Satoshi Nakamoto in 2009, it was the first and is the most popular cryptocurrency today. There are now many other digital currencies too like Monero, Ethereum, etc. Commonly, Bitcoin is known as decentralized digital currency.
Working Of Bitcoins
These are virtual coins, designed to be self-contained on the basis of their value, without needing any bank to move or store the money.
Once you have purchased the bitcoin, you can trade with them and their value is like nuggets of gold. You can utilize your bitcoins for purchasing services and items online, or you can wait for their values to increase further. The only mean for trading bitcoins is via wallet mechanism, by which, you can transfer them from your wallet to another.
There are the different type of bitcoin wallets that you can use. It is a small personal database that you can store on your mobile devices, tablets, personal computers, or even on cloud storage.
Also, you can exchange bitcoin with any other crypto-currency too. You will find different types of exchange portals for different currencies over the internet.
What are cryptocurrencies?
One question that may have come into your mind is that “what are cryptocurrencies, & what you can do with them?”
These are the digital currencies that work as a medium of exchange. For securing and verifying the transactions, cryptography method is used. By this, one can also create the new units of the cryptocurrency, an individual possesses. But remember, crypto-currencies have limited database entries, which you can’t change unless you meet the specific conditions.
Following are the areas where you can use crypto-currencies:
- Earlier it was difficult to find a merchant that accepts crypto-currency as a payment, but now the time is different. There are many sellers that accept bitcoin as a payment for buying goods, both online and offline.
- You can invest cryptocurrencies in the share market. There are stories of many people becoming millionaires just because of investing their bitcoins in shares market. Ethereum is also one of the most recognizable cryptocurrency these days. It has shown rapid growth in its value in past few months.
How do Cryptocurrencies work?
- Transactions are made among peers via cryptocurrency wallets. The public codes scanned first which relate back to private password held by a user, also known as cryptographic keys.
- Then the transactions get recorded on a public ledger, known as “Blockchain.” All the crypto-currency holders have access to the ledger in case they want to download a full-node wallet.
- Every transaction is public, except the one sent by someone, it is encrypted. The transactions lead back to the wallet.
- The one with the wallet password owns the total crypto-currency denoted on the ledger. You can add multiple transactions to the ledger. This is why, the technology behind cryptocurrency and ledger is known as Block-chain, meaning chains of transactions blocks.
But remember, cryptocurrencies are the risky investments. Their value fluctuates rapidly. One day they are on a high peak, and next day, the value may become zero. So, choose your crypto-currency carefully.
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