What is bitcoin and how bitcoin works?

Have you heard of bitcoin? If not earlier, then surely you’d have come across this term during the recent ‘wannacry’ ransomware news. The hackers are asking to pay ransom in bitcoins. What is this bitcoin all about? How it is used? Here are the basics about bitcoin.

 

What is bitcoin?

Bitcoin is a digital currency, also known as cryptocurrency, used worldwide. Bitcoin came into existence in 2009 but there is no reliable proof that who invented the bitcoin system. There is no regulatory oversight over this currency.

 

Why bitcoin is used and preferred?

Because there is no government control or any regulatory body governing this currency. Hence the currency is held and owned anonymously. Tracing the owner of bitcoin is very difficult but may not be impossible.

 

What is the worth of one bitcoin?

Recently one bitcoin was trading at around US$ 1735. The value of bitcoin has increased to this level from $457 a year ago.

 

How much is the usage of bitcoin?

According to a research by Cambridge University, there are 2.8 to 5.8 million users actively using bitcoin wallets. Around 1 lacs merchants and vendors were accepting payments through bitcoins as of Feb 2015.

Use of bitcoins in India

Reserve Bank of India had cautioned the user’s, holders and traders of Virtual currencies (VCs), including Bitcoins, about the potential financial, operational, legal, customer protection and security related risks that they are exposing themselves to vide it’s press releases dated 24th December, 2013 and 1st February, 2017.

 

How bitcoin works?

• Bitcoin can be owned in a bitcoin wallet. There are various bitcoin wallets (just like you use Paytm, freecharge etc., for transacting in Indian currency), you can use these wallets to transact in bitcoins.
• A unique address can be generated through wallet to send or receive payments. But one address can be used only for a single transaction.
• Bitcoin system works on peer-to-peer basis and there is no intermediary.
• Bitcoin transactions are recorded through Block Chain, a shared public ledger. All confirmed transactions are included in block chain.
• Bitcoin wallets use a private key which works as digital signatures for transferring bitcoins from one wallet to other wallet.
• The processing of bitcoin is confirmed through a processors by miners. Mining is a recordkeeping service in this case.
• Payment of transaction fees is optional. But minors may prioritize the transactions first for which transaction fees has been received.