Bitcoin As An Open-Source Peer-To-Peer Digital Currency
Bitcoin is an open-source peer-to-peer digital currency. They are commonly referred as crypto currency. Bitcoins were released as open-source software by Satoshi Nakamato in 2009. Bitcoins can be used in online transactions like any normal currency. The transactions are then recorded in a secure digital ledger called Blockchain. The blockchain is the financial ledger that records all BTC transactions and is not governed by any single authority or board.
This is a very important feature that differentiates bitcoin from a normal currency. Each bitcoin transaction is recorded as “blocks” which is analogous to individual bank statements in conventional banking system.
As mentioned earlier, Bitcoins don’t have a physical form and is created digitally. The units of currency is Bitcoin, represented as BTC, XBT and ?. The smaller units of bitcoins (like Penny, cents) are millibitcoin(mBTC), microbitcoin ((µBTC) and the smallest unit is simply called Satoshi, name after the founder of bitcoin.
Bitcoins are created using computing power. You need to offer your compute power to record transactions; bitcoins are then created as a reward to your service. This is called Mining and is actually created by a group of people that anyone can join.
There is an upper limit set as Bitcoin protocol. As per the protocol, only 21 million bitcoins can be minded. This is another way in which bitcoins are different from normal currencies. The value of bitcoins is determined by demand vs supply theory. When demand increases, bitcoin value also increases and vice versa.
You need to have a digital wallet and a 26-35 alphanumeric character in order to transact using BTC. The digital wallet holds all the information that is required for transacting using bitcoins. You also need a digital signature, a bitcoin address and private key to transact. All the transactions must be digitally signed. Private Key is a secret code (like your ATM PIN) and is a series of numbers and letters. The private key is used to send key information to transact using bitcoins.
The private key sends the record from which the bitcoins were sent to you, the number or amount of bitcoins you wish to transact and the receiver’s bitcoin address. First these information are sent to a wider bitcoin network, Miners will then authorize and record the transaction. They payment is then released to the receiver.
All of the above processes are done with speed and ease, hence BTC is becoming popular. Bitcoins are decentralized, transparent, secure, fast and cheap (less transaction cost).