Bitcoin has ascended as a type of currency in the world that is both famous and notorious for its out of the box form. Here is an explanation of bitcoins and how they work.
What Bitcoin IsRead More »
How Bitcoin Works
The beauty of bitcoin is that it is not controlled by one government or entity. This is good because of the fact that a government or organization cannot control a person’s finances. Let’s say that two people exchange money through bank accounts. The banks and governments can stop those transactions, or even close the accounts of those people.
They are also good because they exist on a decentralized network. So, if one network goes down, you can still access your cryptocurrency because other networks that support it will still be up and running.
Bitcoin utilizes cryptography, the practice of putting messages in codes that no one can read. In order to convert the codes back to their original messages, you need a special key. This is exactly how bitcoin transactions work. Blockchain technology is used in this process.
Due to the fact that bitcoins exist on a decentralized network, the database that they exist on is shared and called a distributed ledger. When you do a transactions, the fact that the transaction has been done gets posted on all of the computers in the network and then it is stored on the distributed ledger.
Public And Private Keys
When you open up a bitcoin wallet, you are given a public key and a private key. A public key is like your username and your private key is like your password. When you do transactions, you public key shows. People who you do transactions with will not see your name—they will only see your public key. The person receiving money from you will only show up as a long line of numbers, not as a name. The private key should never be shared with anyone. If someone gets your private key, they can get into your wallet and send all of your bitcoin to some other user.
The Pros And Cons Of Bitcoin
The pros include being anonymous, fees that are shared among all of the users, generally small fees, being impossible to hack due to blockchain technology, the fact that anyone can use it and the fact that international transactions can be done very quickly. You can do fast transactions over your smartphone and not have to worry about various complications. The only hardware that you need is the computer that you are on.
The cons of bitcoin is that it can be rather tedious to use for people who are not computer savvy, it is easy to use for crime due to anonymity, fee frequently change and a lot of electricity is used when they are mined.