Despite wreaking havoc on the economies of the world, the boom in the cryptocurrency market has made so many people go gaga over Bitcoin.
To this, one of my friends came to ask me, what is this bitcoin? And how do we get bitcoin? Sure, there are many articles on the web about bitcoins, but technical terms make people difficult to understand them. So here we are translating bitcoin into plain English.
What is Cryptocurrency?
Let’s understand the meaning of cryptocurrency and Bitcoin in the most simplified manner.
So, cryptocurrency in layperson’s terms is just a digital form of cash that does not follow any financial systems and allows people to transfer money anywhere without the involvement of a third party, aka Central Banks.
Now, there are thousands of different cryptocurrencies available and bitcoin is the most popular one among them having the largest market capitalization.
Development of Bitcoin
Bitcoin was created in 2008 by a programmer known as Satoshi Nakamoto. Nakamoto aimed to create a digital currency that serves as a medium of exchange without relying on any third-party financial body.
How does the new Bitcoins generate?
New Bitcoins are generated by a competitive process known as Bitcoin Mining. Bitcoin Mining involves users solving difficult mathematical tasks that are received by all users in the network. The miners are rewarded with new bitcoins for their services.
The competition here increases dynamically since there is a limit to several bitcoins that can be mined, which is 21 million, and out of these 17 million bitcoins have already been mined till 2017. So, the greater number of users join the game, the more competition increases.
How does the value of Bitcoin increase?
The maximum supply or the amount of bitcoin that can be produced are already coded in its protocol, which cannot be changed. So, because of the fixed supply, the scarcity of currency increases over time and the value also rises. This is one of the major differences between paper currency and cryptocurrency that can have increased supply via central banks/government bodies.
Why is the price of Bitcoins fluctuating?
As the number of bitcoins that can be mined is limited and the competition is increasing rapidly, so the value of bitcoin increases. Bitcoin is a comparatively new market, so even minor changes in its demand and supply affect the price.
What is Bitcoin Wallet?
A Bitcoin wallet is a software program that stores bitcoins. Every bitcoin wallet has a private key for every bitcoin address. These wallets offer security, privacy, support, and anonymity to user users and help users in sending, receiving, and exchange of bitcoins.
Is Bitcoin legal?
Many countries have legalized bitcoins such as U.S and Mexico and even accept bitcoins as a medium of exchange. However, some the countries such as India, China have banned bitcoins in use. So before you are getting started with its use, we advise going through the guidelines.
So, after reading this article, I hope you must have got an idea about Bitcoins. Go through performing bitcoins in the last few months, learn about it, clear with the concepts, then only decide whether you are going to invest.