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Bitcoin Explained-[Features,Benefits,Limitations]-Step-By-Step


Bitcoin Explained


What is Bitcoin and How it works

Bitcoin is the digital currency or cryptocurrency and it is invented in 2008 by Satoshi Nakamoto.



 That is work on the decentralized system in that article we will explain what is bitcoin and how
 it works also read similar terms of bitcoin.


 bitcoin, the difference between bitcoin and bank and how it works and the pros and cons of using bitcoin.

Today we are going to start from scratch and clarify the third most search term on Google today.

 What is bitcoin if you depressed there is going too technical and we a lot of complicated don’t worry taxinvestcare here.

We interpret bitcoin into simple terms so even if you hold no technical background you’ll be able to understand everything.

In this post, you will understand how it works other than 99% of the population.

Before we discuss bitcoin I want to take a moment and converse about money.

What is money?

By this core money represent value. If I do some work for you. You give me money in exchange for the value I provided you.

I can then use that money to get something of value for someone else in the future.

Throughout history value has taken many forms and people used a lot of different materials to represent money.

Salt, wheat, shells, and even gold also have all be used as a medium of exchange.


However for something to represent value people have to trust that it is indeed valuable and will stay valuable long enough for them to redeem that value in the future.

Until a hundred years ago or so we always trusted in something to represent the money.

However something happened along the way and we have to change the trust model from trusting something to trusting someone.

Over time people found it cumbersome to walk around the world carrying bars of gold or other forms of money. So paper money was invented.

A bank or government would offer to take possession of your bars of gold.

Not only were these pieces of paper much easier to carry but you can spend a single dollar on a cup of tea and not have to cut your gold bar into thousand pieces.

So people began its use as money as an instrument of practically and convince.

However, as time progressed and due to macro-economic changes this bond between the paper receipt and the gold it stands for was broken and now the new bond is used in the world which is a digital medium that's the reason that we should really understand what is bitcoin and how does it work.

It was known as legal tender coins and paper money must be accepted if offered as payment.

So the value of today's money actually comes from a legal status given to it by a central authority in this case the government and so the trust model has changed from trusting something to trusting someone.



Two major problems of Using Money

     1. It is centralized

You have a central authority that controls and issues it. In this case, the government or central bank handled it.

     2. It is not limited by Quantity

The government or central banks can print as much as they want whenever needed and inflate the money supply on the market.

The problem with printing money is that because you’re flooding the market with more money the value of each dollar drops.so your own money is worthless.

When you see prices rising throughout the year’s it’s no necessity that pricing is rising as much that the purchasing power of your money is dropping.

You need more dollars to buy something that used to “costless”.

Once the money places the move to digital money was pretty simple. We already have a central authority that issues money.

So why not make money mostly digital and let that authority keep track of who owns what.

Today we mainly use credit cards, wire transfer PayPal, and other forms of digital money.

The amount of physical money in the world is almost legible and is getting smaller with each year that passes.

Today’s digital money how does it work? I mean I have a file that represents a dollar what stop me from copying it a million times having a million dollar. This is called the double stormed problem.

The solution that bank use today is a “centralized” solution they keep a ledger on their computer which keeps tracks of who owns what.

Everyone has an account and this ledger keeps a tally for each account. We all trust the bank and the bank trusts their computers and so the solution is centralized on this ledger on this computer.

You may know this but were many attempts to create alternative forms of digital currencies. However no one successful in solving the double-spend problem without a central authority.

Centralized Money Issues

Whenever you give control to anyone over the money supply you are giving them enormous power and this created three issues.

        Money Corruption

The first issues are corruption power corrupts and absolute power when banks have a mandate to create money or value. They basically control the flow of value in the world which gives them almost unlimited power.

 Centralized system

The second issue of the centralized system is mismanagement if the central authority interest isn’t aligned with people it controls there may be a case of mismanagement of the company.

The problem with printing too much money it causes inflation and basically erodes the value of citizen money.

Control of Money

You are basically giving away all control of your money to the government or Bank. At any point in time, the government can decide to freeze your account and deny access to your funds.

Even if you use only cold hard cash the government can cancel the legal status of your currency as was done in India a few years back.

Bitcoin Invention

In October 2008 a document was published online by a guy calling himself Satoshi Nakamoto.

The document also called a white paper suggested a way of creating a system for a decentralized currency called Bitcoin.

This system claimed to Crete digital money that solves the double-spend problem without the need for a central authority.

As its core Bitcoin is a transparent ledger without a central authority but what does this confusing the phrase even really means.



Bitcoin vs. Banks

Let’s compare Bitcoin to the Bank. Since most money, today is already digital.
The bank basically manages its own ledger of balances and transactions.

However, the bank ledger is not transparent and it is stored on the bank’s ledger, and only the bank has complete control over it.

Bitcoin, on the other hand, is a transparent ledger at any point in time I can sneak a peek into the ledger and see all of the transactions and balances that are taking place.

The only thing you can figure out is who owns these balances and who is behind each transaction.

This means Bitcoin is pseudo-anonymous everything is open transparent and traceable but you still can’t tell who is sending what is whom.

Let’s explain this with an example you can see on your screen certain rows from bitcoin ledger.

In which the transaction of 1000$ is recorded.

The first transaction of bitcoin was ever made with Bitcoin and it was used to buy 2 pizzas by a guy named Lazlo.

Lazlo publishes a post back in 2010 asking for someone to sell his two pizzas in exchange for 1000$ bitcoins well someone.

Now the prices of these two pizzas are worth well over 100 million dollars today.

Bitcoin is Decentralized

Bitcoin is also decentralized there’s no one a computer that holds the ledger with bitcoin every computer that participated in the system is also keeping a copy of ledger also known as the blockchain.

So if you want to take down the system or hack the ledger you’ll have to take down thousands of computers which are keeping a copy and constantly updating it.
Like most money today digital Bitcoin is also digital.

This means there’s nothing physical that you can touch in Bitcoin. There are no actual coins there are only rows of transactions and balances.

When you “own” bitcoin it means that you own the right to access a specific bitcoin address record in the ledger and send funds from it to be a different address.

So what does all f this means?

Whys Bitcoin is such Big News.

Bitcoin is an alternative to fiat money

Well for the first since digital currency into existence, we now have an alternative to the current system.

Bitcoin is a form of money that no government or the bank can control.
Think about the time before the internet.

Centralization of Information

How centralized the flow of information was basically if you want the information you could get it to form major players.

Today thank the internet information is decentralized and you can communicate and consume knowledge from around the world with one click of a button.

Bitcoin–The Internet of Money

Bitcoin is the internet of money and it’s offering a decentralized solution to money.
Bitcoin has several features over the current systems.



Features of Bitcoin

     1.Control
     2.No-Middleman
     3.Programmable
     4. Open- to all

Control

First, it gives you complete control over your money with bitcoin, you and only you can access your funds.

No government or bank can decide to freeze your account or confiscate your holdings.

No-Middleman

Bitcoin cuts a lot of the middle man form the process of transferring money. This means that in many cases.

Bitcoin is cheaper to use than traditional wire transfer or money orders also unlike fiat currencies.

Programmable

Bitcoin was designed to be digital by nature. This means you can add additional layers of programming on top of it and turn it into smart money.


Open to all


Finally, Bitcoin opens up digital commerce to 2.5 billion people around the world. 

Who doesn’t have access to the internet banking system?

These people are unbanked or underbanked because of where they leave and the reality that they have been born into.

However today with mobile they can start trading on Bitcoin.

Who accepts Bitcoin

Today there are several merchants online and offline that accept Bitcoin.
You can order a flight or order a hotel with Bitcoin if you like it.

There are even bitcoin debit cards that allow you to pay almost any store with your bitcoin balance.

However the road toward acceptance by the majority of the public is still a long one.

Every New system and technology has drawbacks they have already installed some pros and cons so let’s know about some advantages and disadvantages of Bitcoin.



Benefits of Bitcoin

       It made it possible to send and get money anywhere at any time.

      It made people free from the worry of rescheduling for bank holidays, or any other limitations.

      In bitcoin you are the only owner of your money, it is no longer authorized.

      In bitcoin any kind transaction no matter how much it is, it totally safe.

§     During shopping no merchants can charge extra fees without being informational.

§  During the transaction of money there is no need to give full and personal information own identity is hidden.

§  It keeps us safe from illegal corruption and theft.

§  In comparison to banking channel bitcoin transaction is quite fast.


Limitation of Bitcoin

§  It is not accepted everywhere only a few merchants or a group of people aware of it.

§  If an initial problem arises like a virus corrupts data, or the wallet file is corrupted, bitcoin will be lost.

§  The bitcoin value remains to change according to the demand, then it creates confusion at the time of refund.

§  After the transaction to the merchant, it cannot be refunded whether the goods appropriate or not.

§  It has no physical existence, it cannot into currencies.

§  Its value has not approved by any central bank, it is not trusted worthy.

Conclusion:-

After reading the whole article about what is bitcoin and how does it works we conclude that bitcoin is a new medium of transaction and it will also future technology. 

if we compared bitcoin currency to normal currency. It is safe and secure in the terms of the transaction and also it is time saving due to it’s decentralized feature.

Google Ask Questions

      1What is the point of Bitcoin?

Answer. Bitcoin is the Decentralized also public currency it really fasts and secures to traditional currencies.

     2. Is Bitcoins legal?

Answer. While most of the country the bitcoin is accepted as normal currency in japan bitcoin is totally legal to buy anything in India the bitcoin is legal to buy funds and shares and trading.

     3. Is Bitcoin a good investment?

Answer. If we look at the value of the bitcoin it is increasing day by day and it is the most valuable currency in the current world so it would be a good investment in bitcoin.

    4. Who is the founder of Bitcoin?
  
Answer. Bitcoin is the first Decentralized and digital currency that is invented by Satoshi Nakamoto in 2008.

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Laura Bush
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July 16, 2020 at 4:25 AM

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