Asset brokers, politicians, financial advisers, and social media influencers have all talked about Bitcoin as well as its rapid development in the past few years. The whole world looks into how to fully support it as money into their respective economies. Many businesses already accept it as payment and it is traded around frequently by corporations.
Needless to say, Bitcoin has already integrated with the way finance works today and joining now still offers great opportunities benefiting from its growth. If you are new to this asset and is not familiar with it or how it works, then here’s a guide to help you catch up:
What is Bitcoin and how it works
The quick answer to the question ‘what is Bitcoin?’ is that it’s a type of money. You can spend it, store it at banks and wallets, as well as earn it through various means. However, it is completely different from paper money known as fiat.
Bitcoin is data that can stack in a cluster known as a block that connects to other blocks in a network called a blockchain. In lay-man’s terms, Bitcoin is a form of digital money and the blockchain is the World Bank. The main difference is that this system runs using an algorithm rather than relying on organisations.
The blockchain is the platform for the crypto’s network
While paper money can be given to someone and its new possessor is the owner, Bitcoin works in a different way. It cannot be stored, taken, or transferred as it only stays on the blockchain as a piece of data accessible to the public. Despite this, none of them can be stolen as each unit is coded to represent its current owner. If you are to give Bitcoin to somebody else, you just give the blockchain the permission to do this and it will change the current owner for the recipient.
Bitcoin is created through a process called ‘mining’. Just like how real miners crack rocks and ore veins to extract the ore, blockchain miners complete codes to generate a new Bitcoin. In doing so, they also create a new block to expand the network. The blockchain will stop growing once all 21-million Bitcoin is mined.
Blocks are stored in hardware devices that must remain connected to the internet so its blocks can still be accessed by the blockchain. This is called a node and it can be a computer or an internet server. On top of that, it needs to have processing power to provide the network the power to work and 24/7 energy. Nodes continuously working as long as it’s active as every second is important for the network.
The blockchain is operated by various actors
People involved in the blockchain are called under the technical term ‘actors’ within the crypto industry. Each one can be divided into three categories although many belong in two or all of them depending on how involved they are in its development.
People who simply own and trade Bitcoin are called ‘users’. Even influencers who promote the technology and investors of the assets fall under this simple category. Those who maintain the nodes are called ‘miners’ as they are incharge of the systems for mining Bitcoin. They invest in building the device known as the mining rig as well as the energy needed to keep it active.
The third type of actor is the developer who belongs in a community of other developers deciding the next step for the blockchain. Their goal is to have a consensus on how to improve Bitcoin as a mode of payment or fix its underlying issues addressed by current users.
A split between developers can happen which often result in different hard forks, another word for ‘major updates’, that ultimately creates two versions of Bitcoin. This is the case with Bitcoin Cash as the most popular example within the community.
Bitcoin is the beginning of a new age of finance, to summarise all the answers to the question ‘what is Bitcoin?’, it can be described as the herald for a new age of finance. It seeks to change how payment and trading works by proposing an alternative to traditional banking. By being completely operational using an algorithm, it is independent from human-operated organisations.
This opens the opportunity to allow users to have full autonomy over their finances in Bitcoin. It is now accepted as a legal tender in one country, El Salvador, and a frequent asset used for trading by major corporations around the world. Its system works wonderfully and it is still developing into an even better mode of payment. Join now and become a part of its ever growing economy.