There was an uproar in Tekpara earlier this year when TechGiant Tesla captain Elon Musk announced that he had bought Bitcoin for about 1.5 billion. The price of Bitcoin has skyrocketed since his announcement. So today we will discuss what is Bitcoin and how does Bitcoin work?
What exactly is this ‘bitcoin’ thing? And how does it work? Let’s find out!
What is Bitcoin?
Bitcoin is a type of digital currency that is operated without the control of anyone else and without the intervention of any central government management. It is primarily managed through peer to peer (p2p or peer to peer) software and cryptography.
A public ledger of all bitcoin transactions is stored on computer servers spread around the world. Anyone around the world can turn their computer into a server called a node. Those who buy Bitcoin connect to these nodes, which are spread out without any central source like banks, through cryptography.
All transactions are publicly publicized on this network and reach all nodes. Every ten minutes or so, miners collect these transactions through a group called ‘blocks’. It becomes permanently attached to its blockchain. This is how Bitcoin accounts can be easily defined.
The way you keep money in your pocket, there is also a kind of wallet for keeping digital currency. Which the owner of the digital currency can access through his client software. In the case of Bitcoin, things are a little different. There is no such wallet in this case. It’s just a deal with the network to own it.
Bitcoin transactions are done only through a ‘private key’. If anyone can memorize this ‘key’, then he does not need any physical or digital wallet. That is why this concept is called ‘Brain Wallet’.
Who invented Bitcoin?
The bitcoin.org domain name was purchased in 2007 and a white paper entitled ‘Bitcoin: A Peer to Peer Electronic Cash System’ was uploaded to it. Here is the theory of how digital transactions can be done without any central system or government intervention. These are uploaded under the name Satoshi Nakamoto.
The following year, on January 9, 2009, Bitcoin software was released to the public. Nakamoto was involved in the project until 2010.
He then removed himself from the project, leaving other developers in charge.
But no one still knows who Satoshi Nakamoto was behind this name because he kept his name secret.
Now Bitcoin software is open source software. This means that anyone can use or improve its coding for free. Numerous individuals and organizations from around the world are now engaged in its development, including those like MIT.
How does Bitcoin work?
Bitcoin works using blockchain technology, excluding all intermediaries.
In the current financial system, if you need to transfer funds, you are involved with an intermediary such as a bank or any other financial institution. And whenever such intermediaries are added, there is a separate cost for them in the transaction.
How Bitcoin Works
With the removal of these intermediaries, Bitcoin has become a place of great confidence through cryptographic transactions through CPU computing. And there is no need to spend separately for the transaction.
Bitcoin requires only a wallet, a “public key” and a “private key”. Anyone can download a completely free Bitcoin Wallet from the Bitcoin program. Which has a ‘public key’ and a ‘private key’ attached.
The ‘public key’ is basically an address that can be used as a bank account number for anyone to receive bitcoin. And the ‘private key’ is like a digital signature of a bitcoin user who can send bitcoin.
The public key for receiving Bitcoin can be shared with anyone but the private key is confidential only to its owner. All of these hacking incidents are related to the theft of these private keys, not the Bitcoin network. Because, as I said before, hacking the Bitcoin network is not possible with today’s computers.
The owner of this bitcoin cannot be traced by its address, although the record of all transactions made by that address is in the blockchain. Since the launch of Bitcoin in 2009, all transactions have been stored in a ledger.
Which cannot be deleted or modified. The lasers of these transactions are stored in nodes spread all over the world and this is the blockchain.
What is the purpose of Bitcoin?
Bitcoin started its journey mainly as a means of transacting money through the internet. This digital currency is set to be used as an alternative to other digital currencies that are centrally regulated.
Can Bitcoin be converted into a conventional currency?
Yes, yes. Like all other assets, Bitcoin can be converted into a common currency. There are numerous cryptocurrency exchangers available online today. In these exchangers you can sell or buy your bitcoin directly to anyone or any organization. No matter how small the amount. However, there is no way to convert Bitcoin directly into money.
It is true that no one can say with absolute certainty about the stability of Bitcoin. However, it is also true that other standard currencies, such as the US dollar and the UK pound, are excluded from the gold standard.
You read also: FIFA World Cup 2022 | Qatar World Cup 2022 All Latest Update
Is Bitcoin Safe?
The cryptography that Bitcoin runs is based on the SHA-256 algorithm developed by the US National Security Agency. It is impossible to crack it for any purpose. This is because the algorithm needs to test more potential private keys (2256) than the number of atoms in the universe (approximately 108 to 1082).
If we search, we will find many cases of bitcoin exchange hacking But these hacking incidents are not the hacking of customer accounts, but the hacking of bitcoin networks.
What are the problems with Bitcoin?
There has been a lot of criticism of Bitcoin, the main reason being that it consumes a lot of energy. The University of Cambridge has an energy cost tracker that looks at the beginning of 2021 as it consumes about 100 terawatt hours of energy annually. You can understand how much this energy is by giving an example. In 2016, 304 terawatt hours of energy were consumed across England.
It involves various types of criminal activity. Since it is not possible to trace its original owner, its widespread use on the black market can be noticed. Where it is possible to know the identity of the transaction in case of conventional transactions.