Get to know about Bitcoin: Information on Bitcoin | Part 1
Get to know Bitcoin. All the things you need to know first hand to use Bitcoin explained briefly. Concerns about Bitcoin security is covered in this article.
Go to the introductory part “Getting started with Bitcoin”: Bitcoin explained in simple terms If you have missed it.
Get to know Bitcoin: what is Bitcoin?
Bitcoin is a Worldwide Cryptocurrency and the first decentralized currency. It is a distributed peer-to-peer payment network that is powered by its users with no central authority like governments or banks or middlemen in between them. It is transferred from person to person. Bitcoin is completely digital money. It is called a peer-to-peer electronic cash system.
Bitcoin can be transferred from person to person through the internet without going through a bank or a clearinghouse. It solves “Double Spend” problem through the concept of distributed network. Bitcoin is the most prominent Triple-entry Book-keeping system in existence.
Bitcoin Account is easy to setup
It can be used in any country. there are no geographical limitations. your accounts cannot be frozen. To get a Bitcoin account, there are no prerequisites or arbitrary limits. It doesn’t cost anything to start accepting them and it is very easy to setup.
Get to know Bitcoin: Can I see a Bitcoin?
Though Bitcoin has the term coin in it, it is not physical like coin money or paper money i.e.; currency notes. It is a virtual currency for the internet. Bitcoin is as virtual as the credit cards and online banking networks people use every day.
Bitcoin is basically an immutable ledger entry in the transparent block chain public ledger validating proof of ownership of the bitcoin. It is just like an entry in your bank statement when you receive funds in your bank account by way of salary or remittances, but with the difference that the blockchain ledger entry is irreversible.
Bitcoins are in fact, not stored on any particular device, Bitcoins only exist as claims noted in the Bitcoin Network’s Public Ledger, the Blockchain. What is actually stored in the device’s wallet are the means to exert control over Bitcoin claims, the private keys.
Bitcoin balances are stored in a large distributed network, and they cannot be fraudulently altered by anybody. In other words, Bitcoin users have exclusive control over their funds and bitcoins cannot vanish just because they are virtual.
From where do I get Bitcoins?
There are many currency exchanges where you can buy and sell Bitcoins for Dollars, Euros etc. or you can get Bitcoins as payment for goods and services. you can exchange Bitcoins with someone near you who has Bitcoins. you can earn Bitcoins through mining. you can buy anything with Bitcoins.
Very Simple to send and receive Bitcoins
Sending Bitcoins to somebody is a simple as sending an email.
Bitcoin payments are easier than using a credit or debit card purchases. it can be received without a merchant account.
Where do you keep your Bitcoins?
Your Bitcoins can be kept on the hard drive of your computer, your mobile device, online wallets, hardware wallets or stored on paper (Paper Wallets).
Small amounts for everyday use
A Bitcoin wallet is like a wallet with cash. If you would not keep a thousand dollars in your pocket, consider the same for your Bitcoin wallet. It is a good practice to keep only small amounts of bitcoins on your computer or mobile for everyday use. Keep the remaining part of your funds in a safer offline environment.
Think about your Testament
Your bitcoins can be lost forever if you don’t have a backup plan for your peers and family. If the location of your wallets or your passwords are not known by anyone when you are gone, there is no hope that your funds will ever be recovered. Take a bit of time on these matters. It can make a huge difference.
How are Bitcoin Payments made?
Payments are made from a wallet application on your computer or mobile device by entering the recipient’s Bitcoin address, the payment amount and hitting send. To make it easier to enter the long alphanumeric recipient’s address, wallets can obtain the address by scanning the QR code or touching two phones together with NFC technology.
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash.
Get to know Bitcoin: The Vulnerability of Bitcoin
The Bitcoin technology – the protocol and the cryptography – has a strong security track record, and the Bitcoin Network is probably the biggest distributed computing project in the world.
Bitcoin’s most common vulnerability is in user error. Bitcoin wallet, where files that store the necessary private keys can be accidentally deleted, lost or stolen. This is pretty similar to physical cash stored in a digital form.
Get to know Bitcoin: What if I lose the Private Key or Password?
When a Bitcoin user loses his wallet, (forgets or loses the saved private key on a crashed hard drive or mobile device.) it is lost forever. the lost bitcoins still remain in the “Block Chain” public ledger just like any other Bitcoins. it will be there forever as there is no way for anybody to find the private keys that would allow them to be spent again.
There is no password retrieval for Bitcoin. You are solely responsible for keeping your private keys safe.
Fortunately, users can employ sound security practices to protect their money.
Get to know Bitcoin: Privacy and Anonymity
Bitcoin is designed to allow users to transact with an acceptable level of privacy like any other form of money. however, it is not totally anonymous. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place.
The use of Bitcoin leaves extensive public records. various methods exist to protect users’ privacy.
Who owns or controls the Bitcoin Network?
Nobody owns the Bitcoin Network much like no one owns the technology behind email or the Internet. Bitcoin is controlled by all the Bitcoin users around the world. While developers are improving the software, they can’t force a change in the Bitcoin protocol.
To stay compatible users, need to use software complying with the same rules.
Bitcoin can only work correctly with a complete consensus among all users. So, all users and developers have a strong incentive to protect this consensus.
Get to know Bitcoin: Security of the Bitcoin Network – Blockchain
The Bitcoin network is secured by individuals called “Miners” who verify the transactions. After the transactions are verified they are recorded in a transparent distributed public ledger called the “Bock Chain”. The Miners are rewarded for their efforts with newly generated Bitcoins. In fact, anyone can process transactions using the computing power of specialized hardware and earn a reward in Bitcoins for this service. This is called mining.
Block Chain is technically called a distributed ledger technology. It is where people have access to the information. It is permissionless, transparent and immutable.
This public ledger contains every transaction ever processed, allowing a user’s computer to verify the validity of each transaction.
The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses.
This allows all users to have full control over sending Bitcoins from their own Bitcoin addresses.
No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow.
The Bitcoin protocol is designed in such a way that new Bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business.
Bitcoins are created at a decreasing and predictable rate. A predetermined amount of Bitcoin is released every ten minutes and this will continue to happen until the year 2140. Currently, 12.5 Bitcoins are created every 10 minutes per block and it will halve every 4 years until the year 2140.
The number of new Bitcoins created each year is automatically halved over time until Bitcoin issuance stops completely when the total of 21 million Bitcoins in existence is reached.
When this point is reached, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
Get to know Bitcoin: Can the Bitcoin Network be hacked?
Third party services can be hacked, but the Bitcoin protocol itself cannot be hacked.
The way the Bitcoin protocol or the Bitcoin Network operates, it is a Herculean task to hack it. Since there is no central location that is governed by any specific country, it’s very difficult and expensive to hack.
There are some numbers that say to hack a Bitcoin Network for even 10 minutes would cost around 10 Billion dollars. So, there are 10 billion dollars at stake for anybody trying to hack it.
Bitcoin is Unique
Bitcoin is unique in that only 21 million Bitcoins will ever be created. This is not a limitation. Transactions can be denominated in smaller units of a Bitcoin, such as Bits. There are 1,000,000 Bits in 1 Bitcoin. Bitcoin can be divisible up to 8 decimal places – 0.000 000 01 (called Satoshi) and potentially smaller units if it is required in the future.
The software used is completely open source and anybody can review its code. Bitcoin is changing finance the same way internet has changed our lives.
Get to know Bitcoin: Who created Bitcoin?
Bitcoin implements a concept called crypto-currency, first described by Wei Dai in 1998. The idea is, of a new form of money that uses cryptography to control its creation and transactions rather than a central authority.
The Bitcoin specification and proof of concept were first published by Satoshi Nakamoto in 2009 to a cryptography mailing list. The Bitcoin protocol and software are published openly and any developer around the world can review the code or make their own modified version of the Bitcoin Software.
Just like current developers, Satoshi’s influence was limited to the changes he made being adopted by others and therefore he did not control Bitcoin. The community has grown exponentially with many developers working on Bitcoin.
The first Bitcoin was issued in 2009 and there will only ever be less than 21 million Bitcoins in circulation.
Get to know Bitcoin: Advantages of Bitcoin:
Get to know Bitcoin: Payment Freedom
You can send and receive Bitcoins anywhere in the world at any time. no holidays, no bureaucracy, no borders. users are in full control of their money.
Choose your own Fees
There is no fee to receive Bitcoins. Many wallets let you control how much fee to pay as transaction costs when spending.
Fewer risks for Merchants
Bitcoin transactions are secure and irreversible. they do not contain customer’s personal information. merchants are protected from losses caused due to frauds and fraudulent chargebacks. PCI Compliance is not required.
Get to know Bitcoin: Security
Bitcoin users are in full control of their transactions. merchants cannot force unwanted charges as can happen with other payment methods. No personal information is tied to a Bitcoin transaction.
It has strong protection against identity theft. Bitcoin users can protect their money with backup and encryption.
Anybody can verify and use in real time all information concerning the Bitcoin money supply as it is readily available in the blockchain. Nobody can control or manipulate the Bitcoin protocol as it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent and secure.
Get to know Bitcoin: Value of Bitcoin. From where does Bitcoin get its value?
Bitcoins have value because they are used as a form of money. Bitcoin has the same characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) It is verifiable, it can be verified it is real and not counterfeit.
It is limited and scarce like Gold.
Money is very simply any means of exchanging goods and services. We find currencies like the US dollar, Euro and Gold widely accepted forms of money. Gold gets its value because it is scarce, that’s the reason we don’t use Iron or Rock as money.
Bitcoin is based on the properties of mathematics rather than relying on physical properties (like Gold and Silver) or trust in central authorities (like Fiat Currencies).
Keep in mind that Bitcoin is not backed by anything tangible. Just like the Fiat Currency, it’s not on the Gold standard. Bitcoin is not backed by anything except for the trust that people have in the Bitcoin system.
The real value is what people are willing to pay for it.
Bitcoin is backed by mathematics. With the above attributes, all that is required for a form of money to hold value is trust and adoption.
In the case of bitcoin, this can be measured by its growing base of Users, Merchants, and Startups.
As with all currency, Bitcoin’s value comes only and directly from people willing to accept them as a form of payment.
Get to know Bitcoin: Market Capitalization of Bitcoin
As of 2nd December 2017:
Market Capitalization of Bitcoin is the total USD value of Bitcoin supply in circulation, as calculated by the daily average market price across major exchanges.
Bitcoin’s market capitalization — The total number of coins in circulation multiplied by the price
Circulating supply – 16,715,875 BTC
The price of 1 bitcoin – $10500
The market cap for bitcoin is $180,845,426,662 That’s over $180 Billion US Dollars.
Get to know Bitcoin: The price of Bitcoin
The price of Bitcoin is determined by supply and demand. The price increases when demand for Bitcoin increases and it falls when the demand falls.
As there is only a limited number of Bitcoins in circulation and new Bitcoins are created at a predictable and decreasing rate, it means the demand must follow this level of inflation to keep the price stable.
Since Bitcoin is still a relatively small market compared to what it could be in a few more years, it doesn’t take significant amounts of money to move the market price up or down. That’s one of the reasons the price of Bitcoin is still very volatile.
The acceptance of Bitcoins is fast rising, with many new Merchants and Stores getting added to the list of Bitcoin takers on regular basis. Websites such as SpendBitcoins and useBitcoins keep updated records of the places where Bitcoins can be used to buy products and services.
Welcome to the biggest financial revolution of the past 100 years!
Read the introductory part “Getting started with Bitcoin”: Bitcoin explained in simple terms If you have missed it.
- Get to know about Bitcoin?: Information on Bitcoin – Part 1
- How does Bitcoin work? – Part 2
- How to set up a bitcoin account? – Part 3
- Where to buy Bitcoins? – Part 4