Bitcoin in a nutshell
Bitcoin seems as puzzling as its secret founder, Satoshi Nakamoto, an alias for the person or persons who authored the bitcoin white paper entitled; Bitcoin: A Peer-to-Peer Electronic Cash System. This title aptly describes a way to let two entities trade directly with each other without relying on intermediaries. Bitcoin pioneers wanted to remove the middleman, cancel interest fees, and make transactions transparent.
The Bitcoin Blockchain
Bitcoin, a decentralised digital currency, was released in 2009 as the first major application of blockchain technology. Where bitcoin is a virtual or cryptocurrency, the blockchain is the technology that underpins it. A cryptocurrency refers to a digital coin that runs on a blockchain. Bitcoins can be sent from user to user on the peer-to-peer bitcoin blockchain network. It uses public key cryptography and an innovative approach to bookkeeping to achieve the authorisation, balance verification, prohibition on double spending, delivery of assets and recording of transactions. This process happens in near real time at no cost. it seems possible that bitcoin could eventually increase tremendously, but it all depends on how it is adopted. “If bitcoin were to achieve 15 percent of this valuation, its market capitalisation in today’s money would be 10.8 trillion U.S. dollars. With all 21 million bitcoins in circulation, that would put the price of 1 bitcoin at $514,000” (Investopedia).
How the Bitcoin Blockchain works
Traditional currencies are issued by central banks, but bitcoin has no central authority. The blockchain behind bitcoin is a public ledger of every transaction that has taken place. It cannot be tampered with or changed retrospectively making transactions secure and safer than current systems. You can make transactions by check, wiring, cash or Bitcoin (or BTC), where you refer the purchaser to your signature, which is a long line of security code encrypted with 16 distinct symbols.
What is Bitcoin Mining?
Miners play a vital role in the Bitcoin ecosystem as keepers of the blockchain. Miners are individuals or cooperative organisations with access to powerful computers, often stored at remote, privately owned “farms.” They perform complex mathematical tasks in an effort to mint new Bitcoin, which they then keep or exchange for fiat currency. Miners serve as nodes in the blockchain network using purpose-built computers that compete to solve complex mathematical problems to allow a transaction to go through. Each transaction initiates from a wallet which has a “private key.” This is a digital signature and provides mathematical proof that the transaction has come from the owner of the wallet. Individual transactions are grouped together into a block, organised by strict cryptographic rules. The block is sent out to the bitcoin network consisting of miners competing to validate the transactions by trying to solve complex mathematical puzzles. It becomes progressively difficult to mine bitcoins due to the mathematics of the Bitcoin system, and the total number that can ever be mined is limited to around 21 million preventing the flooding of new Bitcoins.