I was first introduced to this old yet new term, Bitcoin, when I was reading a novel by Ravi Subramaniam titled, God Is A Gamer.
What is Bitcoin?
Bitcoin is a virtual currency. It is a digital currency and cannot be printed on paper nor can it be produced as metal coins like the USD or Rupees. Unlike any other currency which is monitored or governed by a governing body ( USD governed by Federal reserve System, Rupees governed by Reserve Bank Of India and so on), Bitcoin is independent and not governed by any governing body. It is Decentralized. The transactions between people take place directly without the involvement of any intermediaries.
For example, when Ashutosh, from Chennai transfers Rs 100000 to his friend Nidhi, residing in Bangalore, he would do it through his bank. The money is transferred from Ashutosh's bank account to Nidhi's. Banks are the intermediaries to this transaction between Ashutosh and Nidhi. But, in case of Bitcoin, no such intermediaries are involved. Bitcoins are sent directly from Ashutosh to Nidhi without involvement of any intermediaries. This system is called P2P or Peer-to-Peer transaction.
The Invention:
Bitcoin is invented by Satoshi Nakamoto. He has kept his identity hidden and was initially assumed to be a Japanese national. He invented Bitcoin in 2008 and published this idea on The Cryptography Mailing List. He then released the Open-Source Software in 2009.
Nobody knows anything about Satoshi except his name. A coder named, Stefan Thomas would keep a close watch on when Satoshi would release a article on Bitcoin forum and the language used in the article. After monitoring 500 articles from Satoshi, he came to a conclusion that Satoshi may be possibly from Central America, the Carribean or South America.
Soon after the invention, Satoshi started collaborating with several companies for the growth of Bitcoin. He shifted the authority of the software to Gavey Anderson. As on 20 July, 2016, The public ledger showed that Satoshi's known Bitcoin address contains nearly 1 million Bitcoins.
Bitcoin Transactions:
Every user has a public key and a private key. Passwords, in simple terms. Bitcoin can be used for any type of transactions given that, both the parties to the transaction has to have registered with Bitcoin. Bitcoin can be used to pay for your transactions, they can be transferred to your friend's wallet also as gifts, and almost all other transaction can be carried out using Bitcoins. When a Bitcoin transaction takes place, the transaction is recorded in what is called a block. When new blocks are created, they are added to the General Ledger, called the Blockchain. More and more transactions take place everyday and maintaining them can be a tough task. Here, Miners come into the picture.
Mining:
Mining is the process of creating Bitcoins. The system of Bitcoins was invented in such a way that, Bitcoins can be created by anybody. To possess Bitcoins, you can either mine them, or receive them from somebody else in your Bitcoin Wallet. Mining is the process in which Bitcoins are created when you solve a mathematical problem. This can sound easy to people with expertise in math, but its not. These math problems are very complicated. People earn bitcoins on solving math problems which are related to bitcoin.
A Miner's task is to post the transactions & blocks to the Blockchain. They create a mathematical formula and turn the transaction into something very simpler, like a sequence of numbers called a Hash. This Hash is attached along with the block in the Blockchain.
Hash has some unique properties. Hash can be easily created from the transaction but on just seeing a Hash, it is impossible to determine the details of the transaction.
Another important property of the Hash is that along with details of the transaction, it also contains parts of the previous transaction or block. Thus, the process is self-checked and is in sequence and if a fradulent activity takes places, everybody would know as the Blockchain is accessible by all.
Limited Bitcoins:
People can mine bitcoins after solving math problems relating to blocks. Initially, 25 bitcoins were mined per block. Roughly, every four years, the mining gets halved. That means, currently, 12.5 bitcoins are mined per block till sometime around 2020. It will again get halved to 6.25 bitcoins per block and if you calculate, the number of bitcoins that can ever be produced are limited. The halving takes place every four years and it will stop roughly around the year 2110-2140 when 21 million Bitcoins would have been mined or produced.
Current Value:
The value of bitcoin is volatile and can change drastically, somewhat like the price of a share. The current value of Bitcoin in terms of USD is 1 Bitcoin is equal to 575.29 USD and that's a lot of money. In terms of Rupees, 1 Bitcoin equals 38464 Rupees.
Bitcoin Sub units:
Millibitcoin is equal to 10−3 or 0.001 of a Bitcoin.
Microbitcoin is equal to 10−6
or 0.000001 of a Bitcoin.
The smallest unit, Satoshi is equal
to 10−8 or 0.00000001 of a Bitcoin.
Identity Claims:
Identity Claims:
Recently, a Australian entrepreneur, Craig Wright has claimed that he is Satoshi Nakamoto along with proof. Prominent members of the Bitcoin community has confirmed his claims after verifying the proofs but many other people have asked for more proof.
To know more and to create your own Bitcoin Wallet (Like a Bank Account in Banks), visit Bitcoin Dot Com
