Last Updated on November 11, 2021 by Wahidullah Pessarlay
Bitcoin Currency Explained In Simple Words
Bitcoin currency is a peer-to-peer system for online payments that do not require a trusted central authority or you can say Bitcoin is divorced from governments and central banks.
If I simplify Bitcoin currency it is more than Bitcoin it is a digital and global (money system) currency. It allows people to send or receive money across the internet, even to someone they don’t know or don’t trust. Money can be exchanged without being linked to a real identity, and the mathematical field of cryptography is the core field that keeps Bitcoin secure.
Bitcoin currency was invented in 2008 by Satoshi Nakamoto that’s why the unit of Bitcoin is named after him as Satoshi. But here is the kicker Nobody has seen this guy Satoshi Nakamoto not before the invention of Bitcoin, not after the invention of Bitcoin. He is as unique and special as his invention
Bitcoin is created by a process called mining ( Here hex and shovels are not used unlike traditional mining) rather in the case of Bitcoin mining hex and shovels are replaced with large chunks of computers and software.
Bitcoin mining is the computer process of recording and verifying information or data on the digital record called the blockchain (which is an online ledger that keeps a secure record of every transaction to a commonplace.) Bitcoin mining is like solving a complex math problem. In bitcoin mining, this task is carried out by computers to solve that complex math problem.
Bitcoin miners are the people who verify and process the data. In return for their work miners are rewarded with a small amount of bitcoin which is the transaction fees paid by users like us when we make a Bitcoin transaction.
The group of miners who first solves the math problem is rewarded with 12.5 newly mined Bitcoins. Hence Bitcoin is the only form of currency that users can mine themselves if their computer has the proper ability (means configuration of the system).
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Blockchain explained in simple words
For a simple understanding of Bitcoin currency first, you have to understand blockchain
Let me first explain blockchain in simple words (common analogy). The blockchain is like a full history of banking transactions, Bitcoin transactions occurred or are stored in a ‘block.’ (BLOCK is the collection of transactions that occur on a Bitcoin network at a set period.) and a countless number of blocks are connected in linear and chronological order inside the blockchain.
Currently, most people use a trusted intermediary such as a bank to make a transaction. But blockchain allows consumers and suppliers to connect directly, removing the need for a third party.
And to keep exchange secure Blockchain provides a decentralized database of transactions that everyone on the network can see. This network is the chain of computers that must approve a transaction before it is verified and recorded.
Now let me explain it in technological analogy
Blockchain is described as a type of “distributed ledger” or decentralized database that keeps a record of Bitcoin transactions, and the technology prevents the same Bitcoin from using more than once.
As the block is the current part of a blockchain that records all the recent transactions and when one block gets completed it is stored in the blockchain as a permanent database. After completion of a block, a new block is generated which has a hash of the previous block now they are connected in linear, chronological order inside the blockchain.
Hence in simple words blockchain is the connection of a countless number of blocks in linear and chronological order where every block contains a hash of the previous block and is stored as a permanent database inside it (blockchain).
The blockchain database is shared by all nodes (a node is a person who has a file of a transaction on the network) participating in a system. The full copy of the blockchain contains every Bitcoin currency transaction ever occurred. So it can provide an insight into any Bitcoin transaction that took place at any time in the past and thus can reveal how many Bitcoins belonged to a particular bitcoin currency wallet address.
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What makes Bitcoin currency special and different than other investment options
One of the main differences between Bitcoin currency and regular money is that Bitcoin can be sent or received from any identity whether it is a real-world identity or not. Unless someone chooses to link his or her name with the wallet address, it will be difficult to tell who owns the address.
Bitcoin currency transaction doesn’t keep track of users it keeps track of addresses where money is. To understand how it is possible? Let me explain.
Each address has two important pieces of cryptographic information one is a public key, and another one is a private key.
- A public key is like your email address it is open to everyone, and anyone can send bitcoins to it. It is termed as public Bitcoin address.
- A private key is like your email address password which is only with the owner and only owner can send Bitcoin with it. That’s why it is called a private address, and it is kept secret.
To send bitcoins from a Bitcoin address, you prove to the network that you own the private key that belongs to the address, without revealing the private key.
It is done with the mathematical field of cryptography. That’s why it is not important to keep track of users it is only important to keep track of addresses, and your Bitcoins will always be secure.
- The core innovation that makes Bitcoin currency so unique is that it uses consensus in a massive peer-to-peer network to verify transactions. It results in a system where payment is non-reversible.
- And accounts can’t be frozen.
- Each Bitcoin has a complicated ID, known as hexadecimal code.
- That is many times harder to steal than someone credit card.
- And since there is a finite number to be accounted for, there is less of a chance Bitcoin or fraction of Bitcoin will go missing.
- Unlike fiat currency that can be reversed even months after they were initiated, a Bitcoin currency transaction can’t be turned around by the sender.
- It is censorship resistant and can’t be blocked and altered.
- Then, there’s a growing mistrust of national currencies, following a number of government policies that have pushed more investors to Bitcoin currency.
- It is not even prone to inflation, unlike fiat currency.
Bitcoin crypto is Limited in Supply like Gold.
Most people still have a difficult time understanding what Bitcoin is or why it has value?.
A good way to look at it is to compare it to gold. So above characteristics make Bitcoin special, unique and sustainable. I have tried to explain Bitcoin in a few and simple words. I hope you should have got an idea about Bitcoin currency.
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So, if we conclude this article then Bitcoin currency is a revolution in the monetary system of the world, praised by industry experts like Bill Gates, Kay Van-Petersen, Jeremy Liew, Warren Buffet, Reid Hoffman, etc. Bitcoin currency is feasible as well as viable.
More and More financial institutions are accepting Bitcoin currency along with other promising coins mainly Ripple xrp coin. Hence Bitcoin money is here to stay and experts predict that Bitcoin price will skyrocket to 50000$ by 2030.
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