The World of Bitcoins

The term bitcoin has made the headlines in various newspapers, starting conversations and debates about the idea of virtual currency being used instead of an online bank. With bitcoins being out there in the market for a couple of years now, people have begun to wonder what exactly are bitcoins, how do they work, and what value do they hold in terms of currency and money? In order to dive into the world of bitcoins, we need to first understand what cryptocurrency is. Here is a short basic course on the idea behind the bitcoin currency, bitcoin value and price of bitcoins.

What Is Cryptocurrency?

The term cryptocurrency is a fancy word for digital currency. The prefix, crypto, comes from the notion of cryptography, where messages are protected for security reasons by encryption and other techniques. Hence, cryptocurrency is a form of digital currency which is created with a combination of mathematical equations and a series of computers performing computations. These computers are known as miners. Cryptocurrency is completely virtual with no physical exchange of any form of currency.

Cryptography is the backbone of cryptocurrency. It is on which the whole system has been created and runs. It is only through cryptography that new coins are created. Moreover, unlike traditional currency mediums, cryptocurrency is not influenced by the government. The privacy of the whole system has allowed it to gain its popularity. The demand and supply in the market sets the price of bitcoin, allowing for the rate of production to be defined as well. With a reference market cap point being set, the cryptocurrencies begin by defining their values.

Finally, cryptocurrencies are designed and initiated with anonymity. Therefore, no one really has an idea as to who owns a certain cryptocurrency.

What Are Bitcoins?

Bitcoin is the first ever cryptocurrency that was invented. The developer appeared and created the system in 2009, following which he disappeared from the spotlight, allowing the bitcoin value to grow. After the creation of bitcoins, a lot of other cryptocurrencies were created which usually go by the name of “altcoins.” Some of these altcoins are Litecoin, Peercoin, and Ethereum.

Bitcoin was created with the intention to be able to be stored offline onto an owner’s physical hard drive. The process of storing bitcoins in such as manner is known as cold storage. This results in the protection and security of the bitcoin, preventing it from being stolen by others. On the other hand, storing the cryptocurrency on the internet is known as hot storage, which makes it prone to being stolen by others.

In the case where someone’s physical hard drive is misplaced or destroyed, the ownership and presence of the cryptocurrency fades away. This results in the destruction of the bitcoin, making it disappear with no owner or value.

How Do They Work?

The way bitcoins work is that they do not required a centralized or commercialized banking system for depositing and withdrawing money. They are owned and exchanged by individuals and tend to be completely virtual. They can be seen as a virtual form of physical gold coins which were used to buy goods or services. The price of bitcoin is set by the market.

Every person owns a virtual wallet where they can hold their bitcoins. As mentioned earlier, this wallet can be stored online, making it hot storage, or offline, known as cold storage. The exchange of bitcoins can be done from one wallet to another, or people can use their bitcoins to purchase goods and services on the internet. The other option is to hold the bitcoins in your own safe vault as a form of investment as the price of bitcoin increases over the years.

The creation of bitcoins is extremely mathematic-intensive and requires a lot of computational power. The amount of energy that goes into creating a bitcoin makes it practically impossible for someone to manipulate the system, as it would not be in their own economic benefit to do so. This makes cryptocurrency and bitcoins safe in the sense that they are sustainable.

Value of Bitcoins

The bitcoin value changes every day. There are websites which regularly update the price of bitcoin. It is estimated that the current total price of bitcoin is worth two billion dollars. The whole cryptocurrency system is unregulated as well as decentralized. Each bitcoin has its own personal value, and there is no common presence behind them.

Miners are the network of people that contribute their personal computers to the bitcoin system. They tend to be auditors of the whole money exchange system, keeping a check on the ledger of the bitcoin. Once miners begin contributing their efforts to the network, they are paid with bitcoins in return.

Tracking Bitcoins

Bitcoins are tracked through a virtual data ledger file known as the blockchain. Every blockchain is unique to every individual who owns a bitcoin wallet. The transactions involving bitcoins are logged onto the blockchain and are made available on a public ledger. This prevents fraud and focuses on authenticity. Everyone has the ability to check the personal ledgers of different individuals, allowing them access to histories of transactions but not anyone’s personal identity.

Bitcoins are known to be the future of money exchange and cryptocurrency. Bitcoin value in terms of the price of the bitcoin tends to increase every day, allowing users to focus more on it. With no central banking system or government control and with complete personal ownership, the cryptocurrency is being known as the one to revolutionize the idea of economic money exchange in the upcoming years. With the system up and running, the bitcoin value tends to increase every day, making it the potential candidate to take over the traditional money exchange system. However, it also has its fair share of competition with various altcoins emerging.