Bitcoin: Revolutionising Payments
Bitcoin has changed money, decentralised hierarchies
and has opened up payments to the future.
What is Bitcoin?
Bitcoin was launched in 2009. It is the first cryptocurrency and is a decentralised form of digital cash. Each bitcoin is a computer file stored in a digital wallet on a computer or smartphone. The motivation behind its creation was the optimisation of payments and the elimination of financial institutions as trusted third parties when processing transactions. The cryptocurrency was first conceptualised by the mysterious Satoshi Nakamoto who wrote in his now famous “Bitcoin: A Peer-to-Peer Electronic Cash System” that “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.
Bitcoin is an online version of cash and users can use it to buy products and services, with many companies increasingly accepting cryptocurrencies. However, we are still far away from the widespread use of cryptocurrencies and bitcoin in everyday transactions.
Bitcoin is open-source which means it is public and free, as no one owns it or controls it. It uses peer-to-peer technology to operate beyond the need of any central authority or bank, where transactions and the issuing of bitcoins is carried out by the network.
Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.”
How it Works
To understand how bitcoin works it is good to look at the following terms.
Blockchain
Bitcoin is powered by what is famously known as the blockchain, which creates a shared public ledger. Each transaction is a “block” that is connected to the code, and creates a permanent record of each transaction.
Blockchain technology has been used to create thousands of cryptocurrencies after the launch of bitcoin.
Blockchain technology has been used to create thousands of cryptocurrencies after the launch of bitcoin.
Private and public keys
A bitcoin wallet contains a public key and a private key, which work together to allow users to initiate and digitally sign transactions, providing proof of authorisation. The private key is used to both encrypt and decrypt information.
This key is shared between the sender and receiver of the encrypted information. The public key is to be used everyone and to encrypt information, whereas the private key is secret and only shared between the two parties.
This key is shared between the sender and receiver of the encrypted information. The public key is to be used everyone and to encrypt information, whereas the private key is secret and only shared between the two parties.
Bitcoin miners
Miners confirm the transaction using high-speed computers and are rewarded in bitcoin for their work. They simply set up a computer and help by solving complex mathematical puzzles in order to get rewards in coin or a fraction of a coin.
The first bitcoin miners were able to earn coins quickly by using what computing power they had in their homes.
The first bitcoin miners were able to earn coins quickly by using what computing power they had in their homes.
Why Bitcoin?
There are many benefits to bitcoin, but here’s a few:
No traditional banks and middlemen
Mobile payments
Accessibility
Peer-to-Peer transactions
Potential for big growth, as bitcoin’s value will grow as years pass.
Private, secure transactions anytime.
Anonymity.
Easy and Fast to use.
Financial freedom
Very low transaction fees for international payments.
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