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Bitcoins – What R they?

What is a Bitcoin ?

bitcoin
Digital Currency

Bitcoin is a new currency, a form of digital currency, created by a person called Satoshi Nakamoto in 2008. The concept was that whenever a transaction takes place between two people, there should not be any middle men to take transaction fees and total privacy of the individuals should be maintained. These are somewhat drawbacks of current plastic money. Hence evolved a new currency called Bitcoins. Bitcoins are created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people or rather mined by people. The only machines used are some software that solves mathematical problems.

It’s the first example of a growing category of money known as cryptocurrency.

How is Bitcoin different as a currency?

Just like any currency, Bitcoins can be used to buy things electronically.

However, the most important feature that makes bitcoins stand aside incomparable is that it is decentralized. Bitcoin is not controlled by any institution. This puts some people at ease, because it means that a large bank can’t control their money.

Physical Form of Bitcoin ?

There is no physical form. Bitcoins are neither printed nor available in plastic form. With normal currency banks can print more money and devalue currency but in case of Bitcoins, no bank can print it or control it.

Bitcoin is infact created digitally by a network of people, a process called Bitcoin Mining. Anyone can join this network. Bitcoins are mined using computing power in a distributed network.

All the transactions taking place involving Bitcoin are also processed by this network.

 

How many Bitcoin can be Mined ? 

The creator of Bitcoins – Satoshi Nakamoto has set a great protocol to be followed by Bitcoin network The protocol says that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, named after its founder Satoshi Nakamoto.

Summing up Features of Bitcoin:

1. Digital Currency – created and stored in digital form only.

2. Decentralised – not controlled by any bank or institution.

3. Buying Power – It can be used to buy  products and services just like conventional currencies.

4. Privacy Secured – transactions are not exposed to any third party.

5. Anonymous – Individuals can hold multiple bitcoin addresses. No one will know their name or personal details.

6. Transparent –  every transaction is recorded in a large general ledger called Blockchain“. If you have a publicly used bitcoin address, anyone can tell how many bitcoins are stored at that address. But they wont know that it’s yours.

7. Transaction fee zero or minimal – there is no or minimal transaction fee. Since there is no middle man, so there is no transaction fees. The fees go to the miners to encourage them to keep mining, which in turn keeps the Bitcoin network secure. They already get a reward of 25 XBT for each block they mine, but this reward halves every 4 years. The plan is that as the block reward diminishes over the time, it will be replaced by transaction fees.

8. Very Fast : Transaction across the world may happen in minutes, as soon as the bitcoin network processes the payment.

9. Non-repudiable : A Bitcoin transaction cannot be reversed. Bitcoins sent cant be returned back, unless the recipient returns them to you. They’re gone forever.

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