Bitcoin

You might be wondering what Cryptocurrency, Bitcoin is and what exactly a BTC transaction means. Basically, Bitcoin is a form of currency that is quite anonymous and completely digital. What is unique about BTC is that it’s the world’s first decentralized payment network that works peer-to-peer, meaning that users are in charge of everything.

 

What You Need to Know

As a user, you probably need to know just two or three things about Bitcoin. First, you can use it to purchase items on the internet. Second, since it is relatively anonymous, people use a BTC transaction to purchase illegal items quite often. The final thing that you should know is that this currency has grown to from a value of a few pennies per BTC around $7,000 in just a few short years.

This means that anyone who bought the currency when it first began could now be worth millions. For example, if someone had bought just 500 Bitcoin when they first launched, or mined it when it was extremely easy to do, that 100 BTC would now be worth $3.5 million. This would have been easy to do back then, considering that the value of Bitcoin was around 3/10 of a cent each.

10 000 Bitcoins worth $70 millions

In fact, a user tried to auction off 10,000 Bitcoin when the currency first began, asking $50. No one was interested. If someone had bought those 10,000 BTC, they would be worth $70 million by the price that it is showing at the time of this writing.

Another interesting thing about Bitcoin is that it’s the first digital currency designed to avoid central authorities and instead place the users trust in cryptography. For example, some of the properties of Bitcoin include the fact that it doesn’t require permission from any central authority. It is unchangeable, it cannot be censored, it´s an open-source, it is decentralized and only peer-to-peer. It is also considered relatively scarce – or a better word might be limited.

Bitcoin is not the first digital currency ever in existence, but it is the first one to actually be successful.

The History of Bitcoin

Bitcoin was invented by someone named Satoshi Nakamoto. In 2009, he released a whitepaper which outlined exactly how the currency would function. This currency has a lot of nicknames. But the main thing to remember is that it is a currency revolution that is changing how people spend money both online and offline.

Why Everyone Should Be Using BTC

First of all, not everyone should be using it. If you do not feel comfortable with the cryptocurrency, then feel free to continue using your regular payment methods. But it does have some major advantages.

When you think about credit card payments, consider how long it takes for a credit card payment to actually get settled. Sometimes, weeks or months go by before payment is officially completed.

But transactions are peer-to-peer. They do not pass through a central Authority and they do not require authorization from a computer or a specific person at your credit card company or bank. Instead, Bitcoin transactions are recorded on a distributed ledger known as the blockchain.

All miners and nodes all over the world have access to this blockchain ledger (or anyone with internet access) and every transaction can be viewed publicly. This allows these nodes and miners to verify each transaction multiple times, which keeps the network completely secure. Miners use their computer processing power and electricity, and in return are rewarded with BTC for each block that they verify.

Bitcoin has a limit of 21 million coins

There is a limit of 21 million BTC. No more than that will ever be created, which is why that it has become so valuable. Unlike the Federal Reserve Bank in the United States or other central monetary authority around the world, more money cannot simply be printed. Bitcoin cannot be mined once that 21 million mark has been reached. That means that it will become more valuable as time goes on and it becomes scarcer.

Bitcoin is definitely revolutionary and its impact on technology and economics is yet to be decided. Some people consider it just to be electronic money. Others think that it could be the basis for further technologies based on the blockchain. Still others consider it a secure way to maintain their wealth without the government ever having access.

Those who are interested in Bitcoin, Ethereum, Litecoin…etc. should definitely keep up on the news because things change quite often. The official website is a great place to find out more about Bitcoin or interact with members of the community. If you simply wish to use Bitcoin as a currency, you don’t need to know much more than how to use it. For investors, it is very different.

So, How Does a Bitcoin Transaction Work Exactly?

In order to use BTC as a currency, you should first understand how a transaction happens. When you send a transaction, it is like sending a message. The message is signed digitally using cryptography, and then it goes to the aforementioned ledger to be verified. This digital ledger is called a blockchain. You can trace the history of every single BTC all the way back to when it was first produced through this ledger.

The Bitcoin does not actually exist in the same way that stocks or cash do. There is no such thing as a physical coin, even as a digital item. Instead a Bitcoin is the result of the records for each transaction that are sent to the blockchain. Anyone using BTC can check to see exactly what transactions a public key is made, trace the history of a Bitcoin back to the original mining of it, or see how much see the balance see the balance of a specific user. So, everyone knows the public profile of the people with a fortune in Bitcoin.

A Practical Example of a Transaction

We will quickly cover a practical Bitcoin transfer in order to understand how the process works. There are three parts to a Bitcoin transaction: the input, the amount and the output. If John is sending Bitcoin to James, the input is the record of where John originally got it, whether it was sent to him by another user or he purchased it through a Bitcoin service with his debit card. The output is the public key that John uses to send it to James. The amount of course is the amount of the transaction.

Each person has a public key that someone could use to send them Bitcoin. This public key is sort of a decoder ring for their private key. No one knows your private key but everyone knows your public key. Your public key is like a transparent vault. People can see exactly what is inside but only you can unlock it with your private key.

Miners and Transaction Verification

Bitcoin miners do the verification for each transaction. Miners are not mining individual transactions, there are actually mining collections of transactions called blocks. Each block takes about 10 minutes to mine. If your transaction is not included on the current block, then you have to wait until the next one. Which means that it can take around an hour or so for your Bitcoin transaction to be verified.

Bitcoin Transaction Fees

There are Bitcoin transaction fees, but they are calculated in a variety of ways. Many cryptocurrency wallet services allow their users to set their own transaction fees. When you send Bitcoin to someone, the leftover amount of what you owe them or are paying them is included as a fee. These are used to increase confirmation speeds by miners by getting them to prioritize your transaction over all of the other ones included in the block.

Conclusion

There is a lot to understand about Bitcoin. If you are a casual user, then all you really need to know is how a transaction works and what you need to do to make one happen. If you are a new investor, you may want to learn more about the technical aspects, because it will help you to understand how and why things happen within the cryptocurrency industry, and allow you to decide just how you are going to invest in Bitcoin. But one thing is certain, cryptocurrency is going to continue to change the way people use money.
You should also check out the 8 best cryptocurrency brokers before you sign up.