Skip to main content

What is Bitcoin ? How does it work in the Blockchain ?

   Whether you've been holding since the early days of Bitcoin or recently heard your weird uncle tell you to invest in cryptocurrency, you might be wondering exactly how Bitcoin works. While this newish type of virtual currency has made headline after headline over the last decade, its underlying concepts and function are simpler than you might think.


 Let's take a look at the basics. Bitcoin at its core is a software protocol based on the blockchain. The digital token has a value based on what others are willing to pay for it, or simply based on the concept of supply and demand. When it first came out, a Bitcoin was worth about 0.0008 cents, but as more people bought into the idea and bought the coin, the price has now climbed to over 50,000 U.S. dollars. Bitcoin is a digital currency based on a decentralized system that records each transaction on a Ledger, also known as a blockchain. That may sound confusing, but it essentially means that the Bitcoin network isn't run from some guy's basement on the other side of the world. Rather, it's ran on thousands of computers across the world simultaneously, without one centralized controller, while many people just buy Bitcoin through Coinbase or other apps, the digital tokens themselves are actually created by Bitcoin miners, which use high-powered computer rigs to solve complex math problems. They confirm transactions on the decentralized blockchain to keep the buying and selling moving smoothly. After a block of transactions is confirmed by miners, the miners themselves are rewarded with a small number of bitcoins. Bitcoin mining is ultimately the underpinnings of how Bitcoin works.


 Miners lend their computing power to the blockchain and get rewarded with digital currency. On January 3rd, 2009, Satoshi Nakamoto mined the first block, the Genesis Block, and was rewarded 50 bitcoins. This brought Bitcoins into existence. But let's learn a little bit more about blockchain. Blockchain isn't Bitcoin as much as Bitcoin isn't the blockchain. Blockchain itself is actually a software protocol that can be used in many less exciting applications to the normal listener like manufacturing, software compliance, banking and other software applications, the first blockchain was described by Satoshi Nakamoto 2008, the creator of Bitcoin. Initially, the two terms were always used together, but blockchain diverged into an even bigger software and technology phenomenon. Blockchains are simple in theory, it's a digital chains of blocks, each block being a group of information. Think of it like folders. In a sense, the blocks are arranged in order chronologically, and they cannot be unordered. It's like a timeline of digital events that are independently verified and securely held through a decentralized network, meaning thousands of computers across the world. You could agree to pay a friend $20 through a blockchain and that agreement would forever be on the blockchain, ensuring you pay when the time comes. It's this secure software protocol that stands as the basis of Bitcoin by having a secure transaction network in the blockchain, Bitcoin tokens are transferred from person to person, securely tracked through blocks of information, all decentralized and anonymous, run by mining computers across the world. Because blockchains are distributed ledgers, the entire Bitcoin blockchain is public. By making such a complex amount of information public, it can be ensured that no changes are made over time because other people would see the changes being made or see that their blockchain that they can see different than the one other person is providing no central authority overseas Bitcoin transactions. Rather, the miners work together to validate them. Bitcoin users will generally have wallet addresses and that's like a string of letters and numbers that can be identified in the blockchain and serve as a sending or receiving location. For digital currency. This address serves as a unique identifier on the blockchain anytime Bitcoin is sent or received to or from this address it's logged in the chain, and it can be traced back and forth and back and forth. 



But what makes Bitcoin worth anything at all? Well, nothing other than what people are willing to pay for it. Well, that and that. There can never be more than 21 million Bitcoin in existence. This creates a finite supply. The only way new Bitcoin is made is through mining, or as a reward to miners for validating transactions. The amount of Bitcoin a miner gets for processing a block slowly decreases over time in a process known as having. The reward for mining is cut in half for every 210,000 blocks mined. This process is set to continue until 2140 when all of the bitcoins, all 21 million of them, are mined. After this, miners will get paid fees based on a structure to continue processing transactions on the blockchains. This also means that mining can get less profitable over time as the rewards decrease. However, that's only if the price stays the same. If the price per Bitcoin goes up. If it goes up faster than the rewards decrease, mining can actually get more profitable, which sometimes happens. The limited supply of Bitcoin also means that there's a supply and demand issue. As we mentioned, if more people wanted to buy bitcoins due to a limited supply, the price would need to go up. That's why we've seen a such meteoric rise in bitcoins price. If the lowest owner of Bitcoin doesn't want to sell for anything less than $50,000, then Bitcoin would be valued at $50,000, because that's the lowest you could buy it for. That's a little bit oversimplified for supply and demand, but essentially Bitcoin is worth what people are willing to pay for it. It doesn't have any intrinsic value. All of this serves as a very basic overview of bitcoins and blockchains, though. We haven't really gone into hashed data, different risks to the Bitcoin network, like something called a   51% attack, or even the cryptography and security that goes into making the blockchain and blockchain wallets completely secure. However to the casual or beginning Bitcoin owner or buyer. That info can sometimes overwhelm and confuse, and warrants its own individual research. In summary, Bitcoin is a digital token validated by a secure, decentralized software network that runs off of computers all around the world. Known as miners, these miners ensure people can buy and sell bitcoins securely, and for their trouble, the miners get rewarded with a small amount of new Bitcoin.


 You can only ever be 21 million Bitcoin in existence and due to that limited supply, as more people want to buy Bitcoin, the price goes up and up until more people are willing to sell it at a given price, supply and demand. No one really knows what's going to happen to Bitcoin or its price, but one thing is for sure, fortunes have been made and lost on the cryptocurrency, but it's likely here to stay. But of course when you make a fortune. The IRS wants a piece of it. If you've bought Bitcoin or any cryptocurrency, you're going to need to file income tax on your earnings or risk being audited by the IRS. In the US, one of the simplest ways to do that is by using legible. Their tax software solution allows you to quickly create tax documents for your cryptocurrency activity for the tax year and analyze your gains and portfolio value throughout the year and be able to maximize your tax savings at the year by making smart informed moves you can learn about the coherent secure system and use it to file your taxes.


 


 

Labels:

Comments

Post a Comment

Popular posts from this blog

Why the US government 30$ trillion owe?

  The United States is in a lot of debt. Currently the country owes $27.2 trillion. But who would even lend them that much money? Who does the US owe this massive sum?  Well, the answer to that is pretty simple. In large part, it owes itself that money, but there's also quite a few other countries it owes to. the US essentially owes two groups of people, the general public, which can be other countries or even investors in the US and itself. But before we get into who makes up those groups and what the percentages look like, first let's get some basics. Whenever the US government needs money, it raises that money through the issuing of savings bonds or treasury bonds. These bonds are basically pieces of paper that say the US will pay the person or agency that buys it back with a little bit of interest. Many people want to buy bonds because they're pretty solid investments, like banks, foreign governments, and maybe even you. The debt ceiling, which you may have heard about,...
Post a Comment
Read more

China really does not want war? Taiwan then whose? Why is Taiwan so important to America and China?

China is playing with peril. still, America will intermediate militarily to cover the island, If China invades Taiwan. This is what US President Joe Biden said during a meeting with the leaders of the Quintet in Tokyo on May 23. China is not sitting still. Beijing's Foreign Ministry prophet Wang Wenbin stressed that Taiwan is an integral part of mainland China. There is no room for concession or concession. Encouraging Taiwan's independence would be like playing with fire. This is what Chinese President Xi Jinping said in 2021. still, there would be nothing to worry about, If the issue was limited to such a war of words. The constitution also has a law on Taiwan called the Anti-Association Law, which states that if Taiwan does not unite with China, also China is naturally obliged to intermediate militarily in Taiwan. multitudinous international relations judges believe that if there is a war between China and the United States in the future, Taiwan will be the flash point of th...
Post a Comment
Read more

The End of Doller empire !

The End of Doller empire!  Saudi Arabia is in discussions with China to price some of its oil sales in yuan, but as ties with Washington continue to be strained. Beijing and Moscow are diversifying. China and Russia have taken another step closer towards dumping the dollar and agreed to trade in their respective national currencies, the Russian ruble and the Chinese yuan. The End of Doller empire Hi everybody. the US dollar has been the most powerful currency in the world for 80 long years.  This reserve currency status gives the United States such unprecedented power over the world economy that can cripple the economy of any country within a fortnight. And because of this power, it has even dominated giant players like Russia and China. But you know what guys? This is where China and Russia have actually come up with a master plan to kill the dollar dominance in the world. And if you look at the past 10 years data, you will see that it's actually working out quite well. In 19...
Post a Comment
Read more

Are we alone in the universe?

A dog! They are looking at the stars in the sky. As we see. May or may not be breathing. Creating or not creating. But one question is right between them. Just like us. Are we alone in the universe? When the Armstrongs returned from the moon, they were quarantined for several days. Why? Because if a virus or any other germs came through them from the moon, i.e. very close to our satellite, scientists thought about the possibility of life in this satellite, isn't it strange? Let's go to the universe in search of life. Earth is the only source of life? This question is very old. There are ten thousand times more stars in our Milky Way alone than there are sand dunes on this planet. To be more precise, this number is ten to the power twenty-two to ten to the power twenty-four or more. If five percent of its stars are like our sun, then the number stands at five hundred billion billion stars. Very good talk. If we assume that even one out of every five Sun-like stars has water and ...
Post a Comment
Read more

What is a stock split?

When you enjoy stock in a company, you enjoy a portion of the company itself. When that company makes further plutocrats and the stock price goes up, you can make plutocrats by buying and dealing with the stock.  But what happens when the company decides to do a stock split? And why would a company indeed want to resolve their stock in the first place?  Stock splits are when a company divides the share of its stock into a multiple of generally two or three, but it can go as high as 100 or indeed 1000. So if a company had 1000 shares on the request, a stock split would turn those shares into 2000 or 3000 shares generally. And if you possessed one share at the time of A2 for one stock split, you'd all of an unforeseen own 2 shares of the company but the price would also be cut in half. unyoking a stock does not add any value innately. It's not a way for companies to just double their request cap. So why would companies do this just for fun? Well, unyoking a stock and therefore p...
Post a Comment
Read more

The story of a genius who stayed behind the scenes in the world of technology.

One who's playing alone behind the screen. Earning billions of bones. But veritably many people know him. In the IT world, his name was supposed to be on par with Elon Musk, Jeff Bozos or Bit Gates. But behind the scenes, he's going to score alone. Name Duan Yong Ping. The name Duan Yong Ping is veritably many people hear in the world of mobile phones. Although his name is unknown, his company BBK is well known among phone gigs. One Plus, Realme, Oppo, Vivo and Command. Don Yang Leg is the sole proprietor of these five popular mobile brands.  These brands have turned his company into the largest mobile phone manufacturing company moment. BBK company has left behind Apple, Xiaomi and Samsung who are presently the biggest brands in the world of mobile phones. But despite this success, utmost of the mobile phone druggies and indeed phone geeks don't know the importance of it. There's in numerous information online about Elon Musk, Steve Jobs and Jackma, who are veritably w...
Post a Comment
Read more

What is minimalism? How to become a minimalist?

 minimalism This concept has gained quite a lot of popularity in the past few years and for good reason. What is this whole thing? It can be summed up as minimalism is about retaining what is most valuable in our lives and deliberately discarding everything else that distracts us. That is, having a clear idea about what is most important in life and what things are most valuable to us and leaving everything else. Live with them. But despite such a definition, minimalism is not a restrictive way of life, nor does it mean that to be a minimalist you have to follow any specific criteria. A minimalist lifestyle is something that is unique to every person. In this case, the main thing is to have a clear idea about what is really important and necessary and live accordingly. Dear visitors let's see how minimalism can change your lifestyle.     Minimalist Home The minimalist life must be deliberately chosen and it must be transparent, ruthless, and purposeful. Because every...
Post a Comment
Read more

Why do Bangladeshis hate India?

The liberation war is going on in December 1771. India didn't share directly in the emancipation war. They're conducting political conditioning on behalf of Bangladesh. About one crore deportees have taken retreat in India. The temporary headquarters of the Mujibnagar Government has been set up in Kolkata. The freedom fighters bivouacked in the border region of India and attacked the Pakistani army from there.  On the autumn of December 3rd, the also Chief of Army Staff General Shyam dialled the Chief of Staff of India's Eastern Army, Lieutenant General Jack Jacob. Manik told Jacob to tell Prime Minister Indira Gandhi that Pakistani aeroplanes have bombed fields in the western part of India. Indira Gandhi decided incontinently. India declared war against Pakistan.  Indira Gandhi's government honoured Bangladesh as an independent country on December 6. Bangladesh has completed fifty times of age. Bangladesh's relationship with India is fifty times old. But in the las...
Post a Comment
Read more

What is Algorithmic trading as well Arbitrage trading? How does it works?

This stock request can be, if Coracias, beast to those that do not understand it, but currently you do not indeed need to understand it to make a plutocrat. The rise of the digital information age and AI has brought about a new way of stock trading called algorithmic trading. occasionally appertained to as automated trading or black box trading. This is basically a program that can trade stocks at high pets and frequency impeccably in line with the request. These programs are given constraints and instructions like timing, price, quantum, et cetera. And a stoner can OK tune how exactly they work. So how does it work also? Let's take a look. Take for illustration an average dealer. They buy 50 shares of a company. When the 50-day moving average goes above the 200-day moving normal. This is basically a specialized index that the stock is due to rise in the short term. also the same dealer would vend that stock when the 50-day moving average goes below the 200-day moving normal. Or th...
Post a Comment
Read more

What is infinite money glitch? How does work fractional reserve banking system ?

  What if I told you that the entire modern financial system functioned on an infinite money glitch where billions, no trillions of dollars were created out of thin air day after day, and at any point the whole system could collapse? Oh, you. You wouldn't be surprised.    But what I just said was the truth, and it's something called fractional reserve banking, otherwise known as the Infinite Money glitch. Here's how it works.  When someone deposits $1000 in the bank, the bank does not hold on to all of that money. Rather, the bank will just keep 10% a $100 as reserves and then loan out the rest or $900 to other people or companies charging interest on the loan. Making additional money for the bank, the Lendy, or the person that took out the $900 loan then goes on to spend that money. To simplify the scenario, we'll say that that person with a $900 loan immediately paid someone else that $900. At this point, when looking at this small financial system, there's a tota...
Post a Comment
Read more