You have probably heard the terms Bitcoin and Blockchain but maybe you don’t understand what they mean. The post below and accompanying infographic provides a beginners guide to Bitcoin and Blockchain.
Bitcoin is the first ever decentralized cryptocurrency which can be even termed as the digital or virtual currency, says cryptosuper.market. Bitcoin is fungible, portable, divisible and irreversible.
The Bitcoin was invented by the name SATOSHI NAKAMOTO in the year 2008 and it was later published as open source in the year 2009. But the person or group behind the invention have no traces of identity as the bitcoin was published by an unknown person or group using the alias Satoshi Nakamoto.
After the invention of Bitcoins many cryptocurrencies emerged, where some used the same system and structure of bitcoin and others implemented the structure and made better digital form of currency. Though there are many forms, bitcoin stands first-1st among them. As the rest of the forms are derived from the bitcoins they are often termed as ALTCOINS which means Alternate coins of bitcoin.
At first Litecoin was taken as an altcoin which later lead to various Altcoins as Dogecoin, Ethereum, Monero and etc. Each and every altcoin has its own specifications where some of them even beat the functioning of bitcoin in some aspects as some of the Altcoins stand as the best by offering greater anonymity than bitcoin.
A Beginners Guide To Bitcoin and Blockchain – What is Blockchain?
To record all the transactions of the bitcoins a public ledger called BLOCKCHAIN has been invented where the blockchain stood as undeniably an ingenious or a creative invention. The blockchain plays an important role, the whole bitcoin network completely relies on the blockchain.
Blockchain is further classified as three types namely public, private and consortium blockchain. Generally blockchain follows a state of consensus where the transactions takes place between the users and are usually confirmed within 10 minutes of Block Time by the network, through a process called Mining.
Block time is often defined as the time taken by the network to generate an extra block in the blockchain. The Block Time differs for each and every Cryptocurrency form, the Block time for Ethereum is 20 seconds.
A chronological order is enforced in the blockchain system by mining. Mining allows different computers to agree on the state of system and it protects the neutrality of the network.
The first ever international blockchain transaction was completed on October 24, 2016. Brokered by the Commonwealth Bank of Australia and Wells Fargo & Co (WFC).
Now there comes the question of storage of bitcoins, bitcoins are generally stored in the bitcoin wallet or crypto wallet. Cryptocurrency is not actually or directly stored in a crypto wallet.
Instead, a private key is stored that generally shows ownership of a public key. So in general a crypto wallet stores both private and public keys and allows to receive and send coins.
If a person loses his / her wallet due to the corruption of the wallet file or hard disk or the data disruption the lost bitcoins that are present in the wallet can’t be retrieved back and they are to be considered that they are lost forever. There are many offline and hardware wallets available.
The Bitcoins use peer to peer (P2P) networking system which doesn’t involve any third party interference in the transaction process. The success rate of the trade increases with the P2P networking system.
P2P networking system became first popular in 1999 with the introduction of Napster application, it is a file system which generally has a set of central servers that’s used to link people who had files with those requested files.
Since the transactions directly take place between the users without the interference of any third party, the transactions are irreversible. But at one point it is possible to refund if and only if the receiver agrees to cancel the transaction.
Generally people often get confused about owning a cryptocurrency, the major point that concerns them which coin to select. Though bitcoin stands first it even has some drawbacks which are recovered in its altcoins. People now-a-days are interested in bitcoins because of its speed of transaction and very low transaction fee offered.
Bitcoin is the world’s most widely used cryptocurrency and thus bitcoin is increasingly viewed as a morganatic or legitimate means of exchange. But there is even a point to be concerned as the price of bitcoin is volatile, price of bitcoin can unpredictably decrease or increase over a short period of time due to its novel nature, young economy and illiquid markets.
It isn’t a tough task to own a bitcoin as there are 4 basic ways through which a person can own a bitcoin, a person can buy them form bitcoin exchange sources or can buy bitcoins from any of their friends or relatives or near by trader or by Accepting Bitcoins as payment for goods and services they provide or by mining the bitcoins.
All the three ways are simple and easy but care must be taken while dealing with unknown people or traders whereas mining isn’t that easy as it seems to be as it’s a process which involves in usage of special software to solve mathematical algorithms in exchange of bitcoins and it isn’t possible as it once was.
If a person wants to begin a transaction and he knows nothing regarding the process then that’s totally futile. We can conclude the information regarding beginning transaction process or steps of the transaction process in few steps as : a transaction can be termed a general transfer of value between the Bitcoin wallets that are involved in the blockchain.
Bitcoin wallets have private key which is generally used to sign transactions by providing a proof (mathematical proof) that the request have come from the owner of the wallet. The signature also prevents transaction being altered by others once it has been issued or started.
All transactions are between the users and are usually confirmed within 10 minutes of block time by the network through mining.
Nowadays for the convenience of the bitcoin users many Bitcoin ATMs have been installed and there are about 3164 ATM machines through out the world. Bitcoin kiosks (Look like traditional ATMs) are generally the machines which are connected to internet and allow the insertion of cash in exchange for bitcoins. As per the study, bitcoin ATM charges about 7% on transaction and 50$ as exchange rate.
Is Bitcoin legal?
There are many countries which legalized the usage of bitcoins and whereas there are many countries which have banned the usage of bitcoins and declared bitcoins illegal. In short we can say that the bitcoin isn’t legalized all over the world.
Countries or Nations like Ecuador, Bolivia, Bangladesh, Kyrgyzstan and Saudi Arabia banned the usage of bitcoins and declared bitcoins illegal whereas, countries like United States, Canada, Australia and European Union accept the usage of bitcoin declaring it legal.
In cryptocurrency we usually have a fork which is given as change in protocol, the forks are classified into hard forks and soft forks. The first Bitcoin fork was NAMECOIN published or generated in the year 2010 and a hard fork published in the year 2017 was Bitcoin Gold.
The most common fork used is the SegWit which is a soft fork, SegWit (Short for Segregated Witness) and SegWit is a protocol upgrade that changes the way data is stored.
The total dollar market value is generally determined by Market Cap value or Market Capitalization value. The market cap value is mathematically calculated using MC=N x P, where MC is the market capitalization, P is closing price per share and N is number of shares outstanding.
Bitcoins are even helpful in the payment sector. For the first time University Of Nicosia, Cyprus accepted fees in the form of bitcoins. Bitcoins are even used in shopping, online transactions and payment.
There are many payment service providers (PSP) offering online services dealing with cryptocurrencies. There are many payment service providers where Bitpay and Coinbase are internationally top ranking exchange providers for bitcoins. The basic work of the payment service provider is to accept bitcoin on behalf of the merchant and convert it to the local or Fiat currency.
Lightning network effectively creates a layer on top of bitcoin and it helps in fast and cheap transactions which can net settle to the blockchain. Lightning Network is pretty complicated and is an extremely promising as a cryptocurrency game-changer.
DAO tokens came into existence in the year 2016, the main usage of the DAO tokens was that the were to receive DAO tokens and then vote for a project to fund. But the concept didn’t work successfully as many people didn’t want the system to be present.
ICO (Initial Coin Offering) refers to the creation and sale of digital tokens. The first sale was held in the year 2014, it’s a project that came into existence to create some certain amount of a digital tokens and sell it to the people usually in exchange of their cryptocurrencies such as Ethereum or Bitcoin.
We hope you have enjoyed this beginners guide to Bitcoin and the Blockchain, if you did please comment and share.
The infographic below helps explain further – courtesy of Bitcoinfy.net
