First, what exactly is Bitcoin? Wikipedia defines it as a public electronic currency that is controlled via the Internet. It is “virtual currency” that can be transferred between users through the Internet. In simple terms, it’s “online currency”. It is best to explain the concept by saying that you don’t need to engage with a government agency or financial institution when you make an internet transaction. Instead of dealing directly with them, you trade money online and there’s no third party.
Let’s begin by looking at how a typical “real-world” wallet works. You transfer funds from your “real life” account to your bitcoin wallet. This is basically transferring money from your wallet to the wallet of the recipient. The process is quicker and simpler because you don’t have to use intermediaries. An example transaction would be You provide me with your email address, I send you your phone number, and you provide me with your email address. Therefore, all that is happening is that we are trading a thing (your email address) in exchange for a thing (your phone number).
Let’s look at the way something like the real thing works. Let’s say I’d like to purchase a cup of coffee as I’m in the city for a business conference. What I would first do is to create an account at the local coffee shop and use their credit card to purchase the coffee. I could then keep my coffee until I get there and pay with my real bank account.
But let’s say that I’m going to a place that doesn’t have access to a traditional banking system, like London. What do I do? Simply put the bitcoin network functions as a digital currency, so I can purchase my fuel using any digital currency I want to use. For example, if I would like to travel to London using the pound, I could do so with the Euro or the USD. The great thing about this is that while it might have a high exchange rate, because there is no central government that oversees these currencies, they function like a very strong currency as there are no known threats to its value.
As for what happens in between these transactions? The transaction actually takes place between all the entities involved with the transaction, called “miners”. These entities are what keep everything running smoothly. The “mining process” is what allows transactions to happen and secures the network. In the case of the bitcoin network, this is done by having users join the bitcoin mining pool, where they pool their resources and together they increase the speed of new blocks being mined.
Now that we have the details behind the scenes, how do we find out if transactions are being monitored or if they are being “minted?” There is actually a new technology in place known as “blockchain technology” which aims to make the whole mining activity transparent. It works this way: Once someone creates a block, they add it to the ledger, which is known as the “blockchain” along with all other transactions that took place during that period of time. Every transaction is then recorded and uploaded to the computer system that is associated with the particular ledger. This lets you know in a glance how much money people have been making and the amount they’ve spent.
Although it sounds great in principle, there’s one issue that everyone must be aware of. Since there is no physical product, there’s no way to actually look into a person’s transaction history. If they discover something that is suspicious, they are able to make a report, but as the transaction is on the Blockchain it is not confirmed whether or not it is valid. The only way to safeguard transactions is to use an offline computer like an offline paper wallet. There are even online sites that can perform this for you, in case you don’t wish to make your transaction via the internet.
The new bitcoin transaction system allows people to track their transactions via an encryption protocol. This makes it nearly impossible for anyone to double spend or alter someone else’s transactions without being noticed. This new technology isn’t compatible with all computers, so some of the biggest names in the field are missing the chance to make the leap to the next phase of computing power. However, there are numerous developers trying to develop software that will allow even the most basic computers to make transactions on the internet. Once the protocols are made available to the public, it will be easier for people to transfer money from one wallet into another and to use their computing power in order to travel around the globe using bitcoins instead traditional currencies.
know more about bitcoin pro here.