“Bitcoin is the beginning of something great: a currency without a government, something necessary and imperative.”
– Nassim Taleb, author of The Black Swan
“PEOPLE use money every day and yet struggle to understand it.”
What is a Bitcoin
Bitcoin, a new currency created as an open-source software in 2009 by an unknown person using the alias Satoshi Nakamoto. A form of digital public money that is created by painstaking mathematical computations and policed by millions of computer users called ‘miners’. Transactions are made with no middlemen – meaning, no banks! There are no transaction fees and there is no need to reveal your real name.
How does a Bitcoin work
Once you own bitcoins, they behave like physical gold coins: they possess value and trade just as if they were chunks of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can gather them and hope that their value increases over the years. It is traded from one personal ‘wallet‘ to another.
How Bitcoins are tracked
A Bitcoin holds a very simple data ledger file called a blockchain. A blockchain’s file size is quite small, similar to the size of a long text message on your smartphone. Each blockchain is unique to each individual user and his/her personal bitcoin wallet.
Every single trade of blockchains is tracked and tagged and publicly disclosed, with each participant’s digital signature attached to the individual blockchain as a ‘confirmation’. These digital signatures, when given several seconds to confirm their transactions across the network, prevent transactions from being duplicated and people from forging them.
Note: While every coin records the digital address of every wallet it touches, the bitcoin system does NOT record the names of the individuals who own wallets. In practical terms, this means that every bitcoin transaction is digitally confirmed but is completely anonymous at the same time.
No one knows what will become of Bitcoin. It is mostly unregulated, but that could change. Governments are concerned about taxation and their lack of control over the currency.
PS: A wallet is a small personal database that you store on your computer drive, on your smartphone, on your tablet, or somewhere in the cloud.
In an article published by CNBC on 2 May 2016, the Australian entrepreneur Craig Wright says he’s the inventor of the digital currency Bitcoin.
Download: Click to download India’s most popular bitcoin wallet, Zebpay.