Bitcoin is a form of cryptocurrency (a virtual currency) and the world’s first digital currency, created by an anonymous group of people called Satoshi Nakamoto in 2009. It is designed to act like real physical money, but it is not physical money. Maybe Bitcoin can replace physical money in the future. It works on blockchain and has a limited supply of 21 million, which means no one can mine more than its limit.
How Does the Bitcoin Algorithm Work?
As I told you bitcoin is digital money that is mined by users who are called miners. Bitcoin uses blockchain technology.
What is Blockchain?
Bitcoin is not controlled by the government and banks because it relies on blockchain which is maintained by a global network of users. A blockchain works like a digital track book which tracks information across multiple computers.
It uses advanced coding (cryptography) which helps to keep data more secure and stop anyone from changing it. If any type of error is held in Blockchain and Bitcoin’s transactions will stop and it will lose its security and value. That’s why blockchain is very important for Bitcoin.
Role of Cryptography in Bitcoin
Cryptography is the same as a secret code that keeps Bitcoin safe. Cryptography is making Bitcoin more trusted and secure. This method is used to hide information from hackers but only users who are sending or buying Bitcoin see this information. Cryptography does two important things in Bitcoin:
Secures Transactions:
If I send Bitcoin to someone my transaction will be locked with a digital signature. This signature proves that Bitcoin really belongs to me but no one can fake my signature because of cryptography.
Keeps the Blockchain Safe:
Bitcoin uses a special kind of cryptography called hashing. Hashing turns transaction data into a unique code. If anyone tries to change even a tiny detail then the whole code will change which helps to make it easy to spot tampering.
How Miners Mines Bitcoin?
Bitcoin can be mined by just a single method called Proof-of-Work(POV). In this method, miners solve multiple and difficult mathematical equations. After solving these equations they add one block in the blockchain. After adding multiple blocks they get some bitcoins in their volet.
This method takes too much time and energy. That’s why only some people are mining Bitcoin. Also, miners need a supercomputer to mine it. If you are trusted in bitcoin mining will write a complete informative article on BTC mining which will help you to become a miner.
Bitcoin as a Store of Value
A store of value is something that holds its worth over time and can be exchanged for goods or other assets and Bitcoin has been doing this for years. Bitcoin is also called digital gold because it increased its price for years and has a bright future. While Bitcoin is relatively new compared to gold, it has gained significant market value, ranking among the top 10 global assets.
Despite its volatility, growing acceptance by countries and businesses suggests Bitcoin has strong potential as a reliable store of value. Many people now become billionaires after holding it. Its limited supply of 21 million will make it more valuable in the future.
How to store Bitcoin?
As you know bitcoin is a digital currency it could not have a physical form. It is stored in specialized digital wallets like other cryptocurrencies. There are two types of crypto wallets:
1. Hardware wallet
A hardware cryptocurrency wallet also known as a cold wallet is a physical device that looks the same as a USB. It keeps the user’s private keys safe. Hardware wallets are safer than software wallets because they are not connected to the internet. If a user wants to send bitcoins to someone he needs to connect his wallet to any computer, mobile phone and tablet then he is able to complete his transaction.
2. Software Wallet
A software wallet is basically a digital wallet like an app that a user can use on a computer, smartphone, or tablet. These wallets are more popular than hardware wallets and most beginners use software wallets. It is easy to use because of its digital existence. This wallet is very safe but it can be hacked because it always connects to the internet.
Trading of Bitcoin
Bitcoin’s current price is around about 70,000 USD which is not possible to buy for everyone. The good news is now people can trade Bitcoin on different platforms like Coinbase, Kraken, Binance, and many others. These platforms allow their users to trade in Bitcoin according to their budget. If someone has a low budget and he cannot buy a single bitcoin then he can make money in bitcoin trading.
Conclusion
Bitcoin has transformed the finance world by bringing about a decentralized, secure, and transparent medium of digital currency. Using blockchain technology provides a new method of carrying out transactions without the involvement of conventional financial institutions. The function of cryptography is to ensure that these transactions are secure and reliable keeping users safe from fraud and tampering. Barring its volatility, Bitcoin has stood the test of time, with many calling it “digital gold” for its scarcity and increasing price.
With several storage solutions such as hardware and software wallets and opportunities to trade on platforms like Coinbase and Binance. Bitcoin continues to entice investors and fans globally. As technology continues to evolve more individuals become aware of its potential. Bitcoin will probably continue to be a major force in the future of digital money.
