Bitcoin:
Bitcoin is a cryptocurrency and worldwide payment system.It is first digital currency,as system works without central bank.The network is peer-to-peer and transactions take place between users directly, without an intermediary.Bitcoin was invented by a unknown person or a group of peopleunder the name Satoshi Nakamoto and released as open-source software in 2009.Bitcoins are created as a reward for a process known as mining.They can be exchanged with other currency,products or service.there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.[15]
History Of a Bitcoin:
On 18 August 2008, the domain name "bitcoin.org" was registered. In November that year, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Nakamoto implemented the bitcoin software as open source code and released it in January 2009 on SourceForge. The identity of Nakamoto remains unknown.[11]
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking.
One of the first supporters, adopters, and contributors to bitcoin was the receiver of the first bitcoin transaction, programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received 10 bitcoins from Nakamoto in the world's first bitcoin transaction. Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold.
In the early days, Nakamoto is estimated to have mined 1 million bitcoins.In 2010, Nakamoto handed the network alert key and control of the Bitcoin Core code repository over to Gavin Andresen, who later became lead developer at the Bitcoin Foundation. Nakamoto subsequently disappeared from any involvement in bitcoin.Andresen stated he then sought to decentralize control, saying: "As soon as Satoshi stepped back and threw the project onto my shoulders, one of the first things I did was try to decentralize that. So, if I get hit by a bus, it would be clear that the project would go on."This left opportunity for controversy to develop over the future development path of bitcoin.
The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John's.
On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions were not properly verified before they were included in the blockchain, which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins. On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a single transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol.
On 1 August 2017, a hard fork of bitcoin was created, known as Bitcoin Cash. Bitcoin Cash has a larger blocksize limit and had an identical blockchain at the time of fork. On 12 November another hard fork, Bitcoin Gold, was created. Bitcoin Gold changes the proof-of-work algorithm used in mining.
How to store and spend bitcoin:
People who wish to hold and spend bitcoins must create a bitcoin "wallet," which stores the information needed to complete bitcoin transactions. The bitcoins themselves remain a part of the blockchain, but your wallet contains the information necessary to access and use your own bitcoins. There are several software providers of bitcoin wallets, and with a little research, you can find one that's best for you.
Bitcoin isn't universally accepted yet, but over the past several years, the list of businesses that accept bitcoin has grown. Just to name a few, the current list includes Overstock.com, Microsoft, Expedia, Newegg.com, Home Depot, DISH Network, and Intuit. Many small businesses accept bitcoin payments as well.
Of course, with the anonymity of bitcoin comes the potential for it to be used for illegal activities, such as gambling or buying drugs or weapons. This was a bigger problem in the earlier years of bitcoin than it is now, but it still exists to some degree.
While bitcoins are still used for illicit activities, common legitimate uses of bitcoin include paying for internet services like web hosting and advertising. There are also several popular online stores set up for the specific purpose of allowing people to shop with bitcoins, and mainstream retailers are increasingly accepting the virtual currency.
Another common use of bitcoin is for low-cost money transfers, particularly to foreign countries. The average cost of a bitcoin transfer is about $0.04, and it takes just over nine minutes to complete, making it appealing for people who need to send money overseas.
Design of a bitcoin:
The blockchain is a public ledger that records bitcoin transactions. A novel solution accomplishes this without any trusted central authority: the maintenance of the blockchain is performed by a network of communicating nodes running bitcoin software.Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications. Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. The blockchain is a distributed database – to achieve independent verification of the chain of ownership of any and every bitcoin amount, each network node stores its own copy of the blockchain. Approximately six times per hour, a new group of accepted transactions, a block, is created, added to the blockchain, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary in order to prevent double-spending in an environment without central oversight. Whereas a conventional ledger records the transfers of actual bills or promissory notesthat exist apart from it, the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.
Advantage of Bitcoins:
Bitcoin is popular for a reason, as it has several advantages over traditional currencies that many people find attractive. Just to name some of the biggest reasons to use bitcoin instead of say, U.S. dollars:
- Bitcoin transactions have few or no fees. This makes them appealing for merchants -- instead of paying a credit card processing fee of, say, 2% of a sale, a merchant can pay a minuscule fee by accepting a bitcoin payment.
- All information is transparent. Details of every financial transaction involving Bitcoin are available on a public "ledger" known as the blockchain, for everyone to see. While personal information is not visible, you can see what amount was transferred, and what bitcoin address it was sent to. This makes it easy to verify transactions, and makes it impossible for bitcoin to be manipulated by any person, organization, or government.
- As alluded to in the previous point, Bitcoin is anonymous. Transaction amounts and times are public, but no identifying information is. While this has been used for negative purposes such as buying illicit items (search online for "Silk Road" for an example), it can also be an advantage for everyday consumers.
Disadvantages of bitcoin:
Every currency has its flaws (yes, even the U.S. dollar), and since bitcoin is so new, it has some unique drawbacks that people should be aware of before getting involved:
- Bitcoin can be a highly volatile currency, which is one of its biggest disadvantages. In fact, on the day I wrote this article (Jan. 5, 2017), bitcoin hit a multiyear high of $1,153.02, then plunged 23% to an intraday low of $887.47, and then finally rebounded to just under $974 as I write. The value of a bitcoin has risen 400% over the past 16 months alone. Price swings like these are unheard of with most traditional currencies, but they're not rare with Bitcoin.
- While many retailers accept bitcoin, it's nowhere near universally accepted. Several proponents have "lived off of bitcoins" for certain periods of time, but it's not practical for the average person to rely completely on bitcoin as their only currency.
- Bitcoin wallets can be lost. While I'm not sure that this risk is any greater than that of losing an actual wallet containing paper money, there are other risks such as hacking, viruses, and simply forgetting your passcode to a bitcoin wallet. Entire bitcoin exchanges have been hacked, costing bitcoin owners millions of dollars. While there are safeguards to protect against most permanent losses, and the security features available to bitcoin users are continuously evolving, there's still a very real risk.
How does a bitcoin works?
This is a question that often causes confusion. Here's a quick explanation!
The basics for a new user
As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.
Balances - block chain
The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography.
Transactions - private keys
A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining.
Processing - mining
Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.
Going down the rabbit hole
This is only a very short and concise summary of the system. If you want to get into the details, you can read the original paper that describes the system's design, read the developer documentation, and explore the Bitcoin wiki.
No comments:
Post a Comment
Follow us and supporting us.
For more information comment below: