Bitcoin will be probably the next years word of the year. You already might have heard about the word Bitcoins or Bitcoin mining in tech blogs or news. The working and complexity of this topic is very vast. There is lot of mathematical equations and compex networking concepts which work behind the scenes. I will try to shed some light on Bitcoin and what is it exactly.I will explain it in details in the next version of this article.
WHAT IS BITCOIN ?
Bitcoin is a digital currency which is used over the internet using a Bitcoin software for trading and buying things just like the real-world currency. Bitcoins can be used same as $ or € or £. For eg. If you want to buy something or have bought something and you want to pay for, you can pay using the bitcoin currency, where it is accepted. You just have to do a normal transaction like you do with your credit or debit card.
Bitcoin requires an application to run which has a wallet from where your money will be transferred or deposited. The original Bitcoin software by Satoshi Nakamoto was released under the MIT license.You have to install that application on your mobile or desktop. The application contains all the transaction data. Bitcoin is a very secure form of digital currency . The transactions are are controlled by the mathematical transformations and complex networking concepts.
What you need during the transaction:
In normal transaction you need your bank card details and the account number for which you will be transferring your money, in some cases name. The bitcoin transaction is bit different. Here, you need only the address, the password and the amount which will be transferred to the desired person on that address.
What is address?
An address is just like the account number where the money will sent or received . You can create different address for different transactions. Now, you can choose with whom you want to share this address for transaction.
Now you will ask where is the security here. The security lies in the wallet where all the information of bitcoin and transaction is stored. The wallet in the application has the private key for your address. Private key is generated by the software itself. Private key is the complex set of alphanumeric charterers which is hard to decode by hackers. When you send the bitcoin Private key associated with your address and password is verified at the other end through the application installed at other end.
As I told earlier you can choose different address for different transaction. As address vary your key will also vary which is one of the part of security.
Glossary of Bitcoin:
Bitcoin: A digital currency you can use as replacement of money where it is accepted.
Bitcoin Wallet: An application required to use the bitcoin where all transaction details are available.
Address: It is same as account number where the money will be sent or received.
Private Key: It is the key(code) generated by the application which is used to validate the transaction.
Password: A password is required to perform the transaction as it will validate your account.
Ledger: It is same concept as in general banking. The difference is your bank statement is kept secret and in the bitcoin world the ledger is available in public. Every transaction is available on every device where the bitcoin wallet is installed.
I will explain working bitcoins in more details in different article as this is just an intro article.