What is bitcoin? – A Beginner’s Guide to Know Everything About Bitcoins

To understand what is bitcoin? First of all, you need to understand how our actual currency works. The money which we use are using in our day to day life like dollars, INR, Pounds, Euros, etc. is known as Fiat money.

If we see the word fiat in the dictionary it means “something that as intrinsic value”. The only reason it as a value because some central authority say so and we as a society accept that.

The problem with fiat money(i.e. our actual money) is that it is limited to the country to country. Like INR is accepted only in India and if you want to do transaction out of India, you have to first exchange it into dollars and then you are able to do the transaction.

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For exchanging the currency you have to depend on the third party on which you trust and for this transaction, you have to pay some charges.

Let make it more clear by taking some real life example. Consider that you are an Indian citizen working in a foreign country and you want to send money to your family in India. Then you have to depend on the third party like PayPal, Payoneer, or any other service on which you trust.

For transferring the fund this third parties charge some transaction fees which can vary anywhere from  5% to 30% of total amount. If you are transferring small amount then it’s ok but what if you have to transfer the big amount, so how you can hide this amount.

But no worries there is a solution for your transaction and that is Bitcoins.

This is not only the advantage of bitcoins, there are lot more. But before seeing the advantage I will tell you what exactly bitcoin is and why bitcoins is so popular?

 

So What is bitcoin?

-In late 2008 an anonymous person named as “Satoshi  Nakamoto” invented a crypto-currency known as Bitcoins.

-Bitcoin is the first form of money which has benefits of both electronic and physical money. Just like electronic money, you can instantly transfer it from anywhere to anyone in the world over the internet but like physical money, you don’t need third-party gatekeeper for the transaction of bitcoins and that because of the brilliant technology behind bitcoins.

-Bitcoin is a virtual currency which means it not physically present, it only stored online or offline in your wallet, hard drive,etc.

-Bitcoin is a decentralize crypto-currency that is no person, government or central authority owns it. It is like the internet, as no one owns it no one can shut it down.

-The transactions of bitcoins happen between person to person like the torrent, so you don’t have to depend on the third party.

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-The transactions of bitcoins are completely anonymous in nature which means no one was able to know that who is behind the transfer except the receiver and sender.

-To ensure the transaction really happened, this transaction is verified by bitcoin miners. The related address with this transaction is stored in public ledger known as Blockchain which is open source i.e. accessible by anyone.

In simple words, bitcoin miners are those people who solve the complicated algorithm to ensure whether the transaction has really happened or not. For verifying this transaction bitcoins miner gets some reward in the form of new bitcoins.

 

Why bitcoins is so popular.

-The main reason behind the popularity of bitcoins is that it has solved the problem of double spent.

-Before bitcoins has comes to existence the most common problem with crypto-currency is double spent which means people has spent some unit of the currency and it is difficult to tell that if it is already been spent or not.

-But this problem is solved the brilliant backend technology behind the bitcoins, and it was the main reason why bitcoins gained so much of popularity.

-Bitcoins is a most expensive currency till now and at the time of writing this post, the price of 1 bitcoin is about $1000USD.

-The number of bitcoins can be ever mined is fixed i.e. only 21millions. Some number says that 15millions bitcoins are already mined and remaining 6 million bitcoins are mined until 2140.

As the supply is fixed and demand goes on increasing the price of bitcoins increasing day by day. That is a reason ever more and more people are investing in bitcoins.

-So your are thinking that there are only 21millions of bitcoins can be ever mined, so how they are sufficient to billions of people in the world. Ya! Right question. The answer for your is, bitcoins Is nothing but a number, which is infinitely divisible.

In fact, bitcoins is already divisible up to 8 decimal which is fondly called as Satoshi name after the founder.

1BTC(aka bitcoin)= 100,000,000 Satoshi

-So if you owns a  bitcoin you already owns millions of satoshi.

 

Some interesting aspect about bitcoins.

The complicated algorithm of bitcoins is very difficult to hack. Some numbers say to hack a bitcoin in 10 minutes can cost you more than 0.5billions US Dollars.

As the production of bitcoins is fixed, they cannot affect by inflation like our fiat money.

 

Why bitcoins has Value and why its value increasing day by day

-As I earlier said that the value of bitcoins is about $1000USD at the time of writing this post. And it increasing day by day is because of some important aspects behind bitcoins.

-Limited and rare like precious metals, as the maximum amount of bitcoins can be ever mined is fixed

-As they cannot own by anyone, no one can shut it down. Even if they are banned but no one can shut it down.

– The real value of bitcoins is what people willing to pay for it.

– The value of bitcoins depends on one aspect i.e. demand and supply, as the supply is limited and demand increasing everyday result in the increase in the value of bitcoins.

-I think one question is going through your mind. As the transaction remain anonymous, how you can prove that you have paid some amount to someone in case of any fraud.

But don’t worry, as I earlier said the address from which transaction happened is stored in public ledger i.e Blockchain. And that is the proof of your transaction.

 

Bitcoins Vs fiat Money (aka actual money like dollars, INR, etc.)

Unlike fiat money, Bitcoins has resistance to inflation even hyperinflation just like precious metals.

You can transfer it from anywhere to anyone without depending upon any third party gatekeeper over the internet. This results in very less or almost zero transaction fees.

Has I said there are no transaction fees to transfer bitcoin. But miner get some reward to verify whether the transaction has actually happened or not.

Miner get reward in the form of new bitcoins and here is the concept of bitcoin mining is introduce. You can read more about mining by clicking here.

 

How to use bitcoins

So you are thinking to buy some bitcoins and do the transaction with bitcoins. Ah! first, read this basic steps for the easy transaction of bitcoins.

-First of all, you need to open an account on the site like coinbase, zebpay, circle, etc. These sites give you a facility to send, receive and store bitcoins online.

-Buying bitcoins from these sites is similar to buying products online. You just need a cash card, debit card or credit card to buy bitcoins.

-After buying, bitcoins are stored in your unique wallet which you can use to send and receive bitcoins. You can generate as many wallet addresses as you want.

-For sending bitcoins you will need receivers wallet address. Sending bitcoins is as easy as sending an email.

 

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