What is Bitcoin really? This article contains all the answers you are looking for.
In general, the amount of gold or silver in Federal Reserve dictates a government’s ability to print money. However, instead of gold Bitcoin uses math. Hence, it is a form of digital currency. People use lots of computing power, to solve complex problems, with the help of software that uses a math formula to generate Bitcoins. Also called as, Bitcoin mining. In addition, this math formula and software is open source. Meaning, it is freely available for anyone to use.
How is Bit coin different from normal currency?
Bit coin is decentralized
How many financial meltdowns or recessions have we come across? The Subprime mortgage crisis, Icelandic financial crisis and the Cyprus financial crisis. The list goes on. None of this can happen with Bit coin. One central authority does not control Bit coin network. Every machine that mines Bit coin and processes transactions makes up a part of the network. All machines work together. Like an ant colony without the queen. In theory, one central authority cannot tinker with monetary policy and cause a meltdown. Neither can a single person take everyone’s Bitcoins.
In one word, it is decentralized. Not a single financial institution controls it. Moreover, neither can they dictate rules for Bit coin exchange between individuals or organizations. People use Bitcoins to buy things electronically just like dollars or Euros. However, the network of people who own Bitcoins called Bitcoin Protocol lay out the rules of transaction instead of banks.
Bitcoin is not physical.
A large community of people digitally creates it. Moreover, anyone can join the community. The actual term for creating Bitcoin is Bitcoin Mining. Bitcoins are mined using lots of computer power using a distributed network. This network also processes transactions made with Bitcoin . As a result, Bitcoin becomes its own payment network.
There is a record of every transaction that ever occurred.
Bit coin network tracks every single transaction ever made in the network. A huge general ledger, called Block chain, a large immutable database tracks everything happening in the network. And guess what? Every single node in the Bit coin network can use Block chain to tell how many Bitcoins are stored at a particular Bitcoin address. Since everyone in theory tracks every transaction. Everyone can trace back a transaction to the owner and receiver
How many Bitcoins are there?
Unlike banks which can print unlimited money, which results in currency devaluation. Bit coin is limited. There are only 21 million Bitcoins present. However, users in bit coin network divide Bitcoins into smaller parts for exchange and trading. The smallest divisible amount is one hundred millionth. Which is also called a ‘Satoshi‘ – named after the founder of Bitcoin.