Tech Check #6- What exactly are Bitcoins?
If you, like me are a soul that lives on the internet, you cannot have missed something called Bitcoins. A lot of complex explanations have been given on the topic, and we found none that actually clarify what Bitcoins are. So today, we break it down.
What are Bitcoins in General?
Bitcoins are a type of Crypto-currency. What this means is that, they are a currency which originated and remains on the Internet. Take this; the Government has issued the Rupee. The rupee has the RBI governor's signature assuring Payment.
In contrast bitcoins are issued by no one. They are controlled by the people. You can only pay in bitcoins if the person you are paying to is ready to accept them as valid payment. For, in most cases, bitcoins cannot be exchanged for physical money, unless you trade bitcoins(Yes, even they are traded!)
Where are they stored?
To own bitcoins, you must have a bitcoin wallet. These are straightforward desktop or mobile applications which tell you your bitcoin balance and allow you to transfer bitcoins to and from your account. This walled is heavily protected by passkeys(which generally exceed 20 words), and provide you a unique ID for the bitcoin marketplace.
How are transactions carried out?
Whenever you spend your bitcoins to buy something, your transaction is added to something called the block-chain. The block-chain is a publicly accessible record of all the transactions that take place. It is used to verify whether the transaction is valid or not. Suppose you make a transaction, it gets added to the blockchain. Now if you try to spend the same bitcoins again, it will be referenced with the blockchain and your transaction will be declared invalid.
What is bitcoin mining?
We saw how a transaction takes place. These records are stored in a chain of blocks in files linked to each other. Now, like anything on the internet, even this could be faked. To prevent this, for adding a new block to the chain, a complex problem has to be solved, which requires a lot of computational power. This is the job of miners. Miners use their computers processing power to add new blocks to the system. In this process, they also unlock new bitcoins which get added to the system. For their efforts, miners are paid a subsidy, which is currently set at 25 Bitcoins per block.
To ensure that the currency is regulated and not too much is generated, after every new block is discovered, the complexity of the cryptographic problem goes up, and more computers are needed to solve it.
So in short, miners are the people who make bitcoin work.
Does anybody use Bitcoins?
The number of things that can be bought by bitcoins is rapidly going up. Companies like WordPress, Piratebay, Virgin Galactic and even some universities are accepting bitcoins as payment.
An extensive list is available here.
Is it legal to use Bitcoins?
Using bitcoins in itself is completely legal. However, their use does make governments uneasy, because it is something they cannot control. Due to the high level of privacy and the person to person nature of the transactions, they can be used for purchasing stuff which is illegal without others knowing. However, at the same time, they allow you to make perfectly legal transactions with the government not snooping.
Who made them?
Actually no one knows. The original paper on bitcoins(read here) was submitted under the name Satoshi Nakamoto. However, that was a fake name, and the actual identity of the person remains unknown till date.
Is is safe?
The very advantage of bitcoins is also its point of concern. Since it is controlled by no government, individuals can try to shake the currency value by acquiring many bitcoins and suddenly dumping them into the market. But such risks are also possible with other currencies, and there is no reason to blame only bitcoins for that. While organizations like FBI will try to get you to stay clear of bitcoins, they are some of the largest hoarders of bitcoins.
Why should I care?
When Bitcoins just came out, this is precisely what everyone thought. But that soon changed as the power of bitcoins increased with the types of transactions they made possible. Soon enough, an entire industry set up around it. Today, the value of one bitcoin, is 74161.04 Rupees! And, what more, it is only increasing. To put it in perspective, only a few its back, it was around 13000 rupees.
Bitcoins have the potential to do to finance what the Internet did to knowledge, put it, unbiased, in front of everyone.
If you have any other questions related to bitcoins, leave them in the comments below!
What are Bitcoins in General?
Bitcoins are a type of Crypto-currency. What this means is that, they are a currency which originated and remains on the Internet. Take this; the Government has issued the Rupee. The rupee has the RBI governor's signature assuring Payment.
In contrast bitcoins are issued by no one. They are controlled by the people. You can only pay in bitcoins if the person you are paying to is ready to accept them as valid payment. For, in most cases, bitcoins cannot be exchanged for physical money, unless you trade bitcoins(Yes, even they are traded!)
Where are they stored?
To own bitcoins, you must have a bitcoin wallet. These are straightforward desktop or mobile applications which tell you your bitcoin balance and allow you to transfer bitcoins to and from your account. This walled is heavily protected by passkeys(which generally exceed 20 words), and provide you a unique ID for the bitcoin marketplace.
How are transactions carried out?
Whenever you spend your bitcoins to buy something, your transaction is added to something called the block-chain. The block-chain is a publicly accessible record of all the transactions that take place. It is used to verify whether the transaction is valid or not. Suppose you make a transaction, it gets added to the blockchain. Now if you try to spend the same bitcoins again, it will be referenced with the blockchain and your transaction will be declared invalid.
What is bitcoin mining?
We saw how a transaction takes place. These records are stored in a chain of blocks in files linked to each other. Now, like anything on the internet, even this could be faked. To prevent this, for adding a new block to the chain, a complex problem has to be solved, which requires a lot of computational power. This is the job of miners. Miners use their computers processing power to add new blocks to the system. In this process, they also unlock new bitcoins which get added to the system. For their efforts, miners are paid a subsidy, which is currently set at 25 Bitcoins per block.
To ensure that the currency is regulated and not too much is generated, after every new block is discovered, the complexity of the cryptographic problem goes up, and more computers are needed to solve it.
So in short, miners are the people who make bitcoin work.
Does anybody use Bitcoins?
The number of things that can be bought by bitcoins is rapidly going up. Companies like WordPress, Piratebay, Virgin Galactic and even some universities are accepting bitcoins as payment.
An extensive list is available here.
Is it legal to use Bitcoins?
Using bitcoins in itself is completely legal. However, their use does make governments uneasy, because it is something they cannot control. Due to the high level of privacy and the person to person nature of the transactions, they can be used for purchasing stuff which is illegal without others knowing. However, at the same time, they allow you to make perfectly legal transactions with the government not snooping.
Who made them?
Actually no one knows. The original paper on bitcoins(read here) was submitted under the name Satoshi Nakamoto. However, that was a fake name, and the actual identity of the person remains unknown till date.
Is is safe?
The very advantage of bitcoins is also its point of concern. Since it is controlled by no government, individuals can try to shake the currency value by acquiring many bitcoins and suddenly dumping them into the market. But such risks are also possible with other currencies, and there is no reason to blame only bitcoins for that. While organizations like FBI will try to get you to stay clear of bitcoins, they are some of the largest hoarders of bitcoins.
Why should I care?
When Bitcoins just came out, this is precisely what everyone thought. But that soon changed as the power of bitcoins increased with the types of transactions they made possible. Soon enough, an entire industry set up around it. Today, the value of one bitcoin, is 74161.04 Rupees! And, what more, it is only increasing. To put it in perspective, only a few its back, it was around 13000 rupees.
Bitcoins have the potential to do to finance what the Internet did to knowledge, put it, unbiased, in front of everyone.
If you have any other questions related to bitcoins, leave them in the comments below!
Tech Check #6- What exactly are Bitcoins?
Reviewed by Shivam Kumar
on
12:32
Rating:
Reviewed by Shivam Kumar
on
12:32
Rating:
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