Bitcoin is a subject of conversation that seemingly everyone has heard about in some capacity over the last few years, but at the same time not everyone fully understands. It is one of those words that we all seem to hear about in the news when the price either skyrockets or falls off a cliff, but the full story behind what Bitcoin is and how it works can be quite a bit more complex. Bitcoin is a digital currency that people use to conduct transactions both in the real world and the virtual one as well. All things considered, many people who have heard about Bitcoin and who may even understand that it is a currency, still do not understand how Bitcoin works. Let’s explore that.
What This Currency Really Is
Despite the name, Bitcoin is not a physical coin. One of its most endearing attributes is the fact that it does not have a physical representation like fiat currency. It also does not have a governing body that oversees Bitcoin or the Bitcoin network. There is no Federal Reserve for Bitcoin or any other agency that monitors how much of the digital currency is available or how it is distributed. Instead, this is a virtual currency that is freely traded among anyone who wants to be involved with it.
There is a massive public ledger of all transactions as they occur. These transactions are anonymous, but they are all available in the public ledger for all to see. That helps the entire community better understand the real value of this special currency that they hold.
Getting Your Own Unique Bitcoin Wallet
Obtaining a Bitcoin wallet to buy and sell Bitcoins and make other transactions in Bitcoin is as simple as agreeing to sign up for one of these wallets. Once you have made that choice, then you are already on your way towards transacting in Bitcoin. You will need the wallet in order to send or receive funds in Bitcoin as it will provide a unique address for you to provide to whomever you need to transact with.
How Bitcoin Transactions Work
Bitcoin and blockchain are a group of nodes or computers across the world that all consist of a BTC code. Every computer has blockchain for Bitcoin. What does this mean? It means that every computer contains all transactions of Bitcoin. This is basically meant to ensure that nobody can trick the system – if they try, then every computer or device will reject the transaction. As such, the Bitcoin network works transparently – every person is able to see the transactions as they occur. Besides, even people who are not mining or on the network can still view Bitcoin transactions via block explorers. Currently, there are more than 10,000 nodes that run the BTC code. The more computers attached to the blockchain, the more stable and secure is the network system.
Although anybody can participate in the Network, not everyone can mine. You can participate as long as you have adequate storage space to download the whole blockchain as well as its transactions.
The smallest amount that one can send is equal to 546 satoshis (equivalent to .00000546 BTC). A satoshi is equal to one 100 millionth of a coin. This is an incredibly tiny amount of Bitcoin and at present, Bitcoin is being valued in the thousands of dollars for a single coin.
Where Does The Value Of Bitcoin Derive From?
Just like fiat currencies, the value of this currency comes from the value that the public assigns to it in their minds. Investors put a price on the value of Bitcoin by trading them back and forth all day and night, but there is no physical asset that the currency is tied to. Digital currency advocates cheer the fact that the market currently values these digital currencies quite handsomely.
Government regulations could begin to play a role in the digital currency space, and that could potentially provide a springboard for Bitcoin in terms of mass adoption while also creating some major problems for those who believe in the power and the promise of these coins. Still, the value of Bitcoin right now is quite high, and many believe that it is only just beginning.
Using Digital Currencies In The Physical World
One cannot pull out their wallet and retrieve something that physically represents their digital currencies. They can only trade with vendors who agree to accept digital currency as a form of payment. Fortunately, the pool of people who do exactly that has been growing in recent years. It seems that no one wants to be left out of the rain so to speak when it comes to what digital currencies have to offer.
Major outlets such as Starbucks have embraced digital currencies a lot faster than some other companies. This coffee shop chain has always liked to try to remain on the cutting-edge of new trends, and they spotted the appreciation for digital currencies a lot sooner than many others did. Thus, they began to offer their customers the option to pay for their hot or cold caffeinated beverages using digital currencies. It can even be as simple as pulling out one’s phone and swiping it over a special reader that can identify that phone and the digital currency that it holds within a wallet.
Other Crypto Challengers Are Around Every Corner
Success tends to breed copy-cats, and this is no exception when it comes to digital currencies. The wild success of Bitcoin has led to a lot of imitators over the years. Some of these are legitimate opportunities and some are scams. It is important to read up on them carefully before considering investing in any of them. Many have followed the same model as digital currencies before them, but there are plenty of con artists out there as well who would like nothing more than to steal the real-world currency of those that they can dupe.
Keep an eye on what the various challengers are doing and how you can protect yourself from the potential for scammers out in the wide world of cryptocurrencies. It is best to keep yourself protected like that.