Bitcoin is an innovative payment network and a modern kind of money. It is commonly referred to as a decentralized digital currency. It is a consensus network that enables a new payment system and completely digital (virtual) money.
Bitcoin cryptocurrency payment system was formulated in 2009. It was issued as an open-source with a public design. By analogy, it is like being able to send a gold coin via email.
Bitcoin possesses no central authority or banks to manage transactions. These coins are issued collectively by the network. Balances are maintained on a public ledger in the cloud.
Apart from fulfilling the function as a reward for mining, Bitcoin can be interchanged for other currencies, and services in legal virtual markets. All of the Bitcoin transactions are verified by a huge amount of computing power.
Bitcoin promises the lowest transaction fees when compared to traditional payment systems as it is governed by a decentralized authority.
Nobody owns the Bitcoin network. Bitcoin transactions are verified by Bitcoin miners obeying mining options. Developers are rigorously working on the software without altering the Bitcoin protocol.
Each user is free to choose any software version they prefer. Bitcoin works aptly when there is a definite consensus among all users. Therefore, each user and developer must protect their consensus.
Bitcoin uses peer-to-peer technology to ensure instant payments. P2P represents a flat network without any single controller or server node. This technology enables users to transact directly without any disturbance from third-party.
Behind the scenes, the Bitcoin network shares a massive public ledger called the "blockchain" to record the transactions. This ledger makes a note of every transaction processed and verifies the validity of each.
Each transaction is secured by digital signatures, allowing users have complete control over bitcoins. Thus, there are no chargebacks, no fraud, and zero theft is noticed.
Miners are the specialized nodes, which regulate the generation and flow of currency. P2P nature ensures currency is regulated and distributed evenly.
The technical architecture of Bitcoin is composed of 3 main components:
One bitcoin is divisible to 8 decimal places, and the smallest unit is termed as a Satoshi.
Bitcoin's price mostly depends on the size of its mining network. Mining Network is the function through which bitcoins are released into circulation. The larger the network, the costlier it is to produce new bitcoins.
The mining network's aggregate power has recorded an immense increase over the past year. As of April 2017, one bitcoin is worth $1,223. Today's market for all bitcoin in circulation exceeds more than $7 billion.
The Bitcoin technology deals with a strong security track record. It is probably the widest distributed computing project in existence. Bitcoin users can employ sound security functions to safeguard their money or utilize service providers to proffer better levels of security and insurance against theft or loss. Other merits of Bitcoin include:
Bitcoin offers many unique properties, enabling exciting uses that are uncovered by any previous payment system before. Even though it is not a legal tender, Bitcoin is still high in popularity and resulted in the launch of other virtual currencies like Altcoins.
Arogyalokesh is a Technical Content Writer and manages content creation on various IT platforms at Mindmajix. He is dedicated to creating useful and engaging content on Salesforce, Blockchain, Docker, SQL Server, Tangle, Jira, and few other technologies. Get in touch with him on LinkedIn and Twitter.