What Is Bitcoin? How Does It Work – 2022

Okay, so you’ve heard about it enough times from your colleagues, friends, family, and even your distant relatives! This one term has dominated their vocabularies for the last few years – Bitcoin! Not to mention digital currency, cryptocurrency, blockchain – the terms just keep appearing out of nowhere! But what do they mean?

Let’s start with the basics – what is bitcoin?

What Is Bitcoin?

In simple words, Bitcoin is decentralized digital money that may be transmitted from user to user on the peer-to-peer bitcoin network without middlemen.

But that’s a lot of jargon. Let’s simplify that for you.

Bitcoin is a type of cryptocurrency. In fact, it was the first cryptocurrency that was ever invented. Today, there are more than 6,000 cryptocurrencies in the world, and Bitcoin is valued the highest among all of them. A lot of people tend to use Bitcoin and cryptocurrency interchangeably, but it’s always good to know the difference between the two.

Bitcoin was the first cryptocurrency released by Satoshi Nakatomo, just after the 2008 global financial recession. It is based on the concepts laid out in a whitepaper written by the enigmatic and pseudonymous Satoshi Nakamoto in 2009.

The identity of the individual or persons responsible for the invention of the tech is still a secret. It is predicted that Bitcoin would have cheaper transaction costs than existing online payment systems. In contrast to government-issued currencies, Bitcoin is managed by a decentralized authority.

All bitcoin transfers are confirmed by a large amount of processing power, which is used to verify the transactions. Bitcoin is neither issued nor supported by any banks and other government financial institutions, and an individual bitcoin does not have any monetary value in the traditional sense.

How Does Bitcoin Work?

The Bitcoin network relies on blockchain tech, which is a shared public ledger. All transactions that happen are included on this blockchain, which cannot be tampered with. The blockchain allows Bitcoin wallets to smartly calculate all their spendable balances so newer transactions can be verified.

This ensures that they’re actually owned by the spender. The chronological order and integrity of the blockchain are protected by cryptography. In Bitcoin wallets, a hidden piece of data known as a private key or seed is stored.

The private key or seed is used to sign transactions, therefore giving proof that the transactions originated from the wallet owner. In addition, the signature prohibits the transaction from being changed by anybody after it has been completed and released.

How To Earn Bitcoin?

There are two ways to earn Bitcoin.

• Mining
• Investing

Earn Bitcoin Through Mining

Well, not in the traditional sense of the word, but mining is the process of solving a computational puzzle that’s then recorded on the blockchain. Cryptocurrency mining is essential for Bitcoin’s transactional ledger. Over the past few years, miners have grown very skilled, utilizing sophisticated gear to expedite mining operations.

Miners add transactions to the public ledger and create new Bitcoins through a complex peer-to-peer process called Bitcoin (BSV) mining. It takes a lot of computing power to maintain the Bitcoin ledger up-to-date and protect the Bitcoin network.

Earn Bitcoin Through Investing

The other way is investing, which is possible via cryptocurrency exchanges. The majority of people who buy bitcoin do so as a kind of currency speculation, wagering that the value of one bitcoin in U.S. dollars will rise in the future relative to its current value.

You may easily convert Bitcoin for fiat currency or commodities such as gold by taking advantage of extremely competitive exchange rates. The tremendous liquidity of Bitcoin, when combined with its low cost of entry, makes it a fantastic investment vehicle for anyone looking to make rapid money. Furthermore, because of the high demand for Bitcoin on the market, it might be a feasible alternative for long-term investment.

Top Characteristics Of Bitcoin

Here are the top characteristics of Bitcoin:

• Decentralization – This is one of the most important selling points of Bitcoin. The currency cannot be regulated by a central authority like a bank or a government. In essence, it is controlled by a group of miners who collectively keep the network safe, without having the ability to fudge results individually.
• Transparency – Every transaction that has ever occurred on the blockchain of Bitcoin will be visible to everyone who has access to a public ledger. Although individual user identity can never be traced, wallet addresses are stored on the network in perpetuity.
• Speed – Bitcoin is way faster than traditional banks because it takes a significantly lesser amount of time to process international transactions. While banks get caught up in a huge mess of paperwork and authorizations, Bitcoin transfers value permissionless.

FAQs

What is the Bitcoin price?

If you’re wondering what the price of Bitcoin is at the moment, it’s hovering around $45,600 at the time of writing this. Bitcoin to INR means that now one Bitcoin is ₹ 33.93 Lakh. You can buy bitcoin or fractions of bitcoin, and then exchange it on the crypto market using sites such as CoinSwitch Kuber.

Is bitcoin legal in India?

Bitcoin is not illegal in India, however, it is yet to be regulated.  It remains to be seen what the status of bitcoin will be in the next few years in India.

Where is bitcoin accepted?

Bitcoin is accepted by very few vendors across India, including bookstores, restaurants, and more. They are rare however but are slowly increasing in number. You can exchange bitcoin however on sites such as CoinSwitch Kuber.