You might hear a lot about Bitcoins and Cryptocurrencies on the internet. So, today you will get to know What is Bitcoin and how it works?
In this article, I will explain all the topics about Bitcoin & its insights briefly in simple terms. Also, find out how Bitcoins solve great fintech problems and fuel the payment industry.
Discover the hidden creator behind Bitcoin & see how are bitcoins created in the video below.
Next, we will show you how to create a bitcoin address and identify different types of bitcoin addresses format.
Lastly, as a bonus, you get to know how to get free bitcoins forever.
So, let’s get started.
Bitcoin Definition: What is Bitcoin?
Bitcoin(BTC) is a Digital Cryptocurrency, which uses Peer-to-Peer Cryptographically verifiable Technology to secure a transaction without needing intermediaries or a Central Bank.
Bitcoin acts as an alternate payment system, where you can send and receive bitcoins using a Bitcoin Wallet for Goods and services equivalent to a fiat currency.
Now, let’s see how Bitcoin technology solves fintech problems.
What Problems can Bitcoin solve?
Bitcoin cryptocurrency was created to solve problems like high transaction fees at Banks, Anonymity of the users, and total control of funds.
Bitcoin uses Blockchain technology, where every transaction is stored and ledger records are maintained.
Also, it’s Tamper-Proof and Publically visible to anyone where anyone can verify his Bitcoin transaction data.
Now, you have got some idea about what is Bitcoin and how it contributes to this world.
Next, you will know who created Bitcoin Cryptocurrency.
Who founded Bitcoin Cryptocurrency?
Satoshi Nakamoto founded the Bitcoin CryptoCurrency in the year 2008. But, it’s still a mystery who he is in person, and behind the real creator of bitcoin.
Presently as a preserved standard, the Name Satoshi Nakamoto was given to the Bitcoin Creator. Besides, No one has found the Real Creator of Bitcoin yet.
So, now let’s learn how is Bitcoin created and the whole process behind it by watching the video below.
What is Bitcoin Mining?
Bitcoin mining is the process of creating new bitcoins by validating transactions and New block problems on the Bitcoin Network.
Later, the ledger records are stored on Blockchain and are publically accessible.
Watch the video below to see How Bitcoin mining works.
So, after watching this video you got an idea of how bitcoin is created and how they distributed among the workers for rewards in the form of bitcoins.
As Bitcoin uses a system called the Proof of Work Logic. It requires high computing power to validate the transactions in the block as seen in the video above.
Which is cryptographically secured, and can be trusted, and verified through the Blockchain.
So, What is Blockchain? Read on.
What is Blockchain?
Blockchain is a system in which records of transactions are stored & maintain through several computers linked in Peer to Peer network.
Or, simply an unbreakable chain that can’t be tampered with once it is written.
Example: Whenever miners solve a block, which contains a new mathematical problem & new transactions to verify. After the solution is found, the data is written to Blockchain.
Let’s make it even simpler with an example below for you.
An Example for Bitcoin Methodology.
To understand Bitcoin Methodology, Let’s walk you through a simple example. If you watched the above video, you might notice how bitcoins are generated and how users are rewarded.
Bitcoin Example with a Rubik cube: A Teacher gives an unsolved Rubik cube to everyone in the class and asks them to solve it as soon as possible. Also, tells that the first one to solve will get a reward.
So, the student who solves it first and submits gets the reward.
The idea and logic behind the bitcoin methodology are similar to in the real crypto world of Bitcoins. Where the rewards are distributed among users who submit the correct answer first and hence, get the reward.
Similarly, to mine Bitcoins you have to use ASIC(application-specific integrated circuit) Miner.
So, let’s read how ASIC miner is used to mining bitcoins in the next section.
What is Bitcoin ASIC Miner?
Bitcoin ASIC miner is a machine that is specialized and integrated with many ASIC Chips to solve the problems set by the New block on the bitcoin network.
It’s more powerful and faster than a normal personal computer, Maximizing the chance to get the reward in the form of Bitcoins.
These Bitcoin ASIC mining machines cost 30x more than a normal PC But are only designed to mine Bitcoins & no other works.
In the next section, You can read How Bitcoins are generated?
How are Bitcoins Generated?
Bitcoins are generated in a process called bitcoin mining. Where huge ASIC miners are used to solve the mathematical problem given by the Bitcoin Network.
To understand in simple words, read the points below.
- Bitcoin miners use sophisticated computer equipment to solve complex puzzles to verify and validate groups of transactions called blocks.
- If successful, this block is added to the blockchain record, and miners are rewarded with a small amount of Bitcoin.
- The blockchain contains all the transaction details, balances, and records. Bitcoin users can then verify their data on the Blockchain.
- With every new block, its difficulty increases. Also, Bitcoins transaction is irreversible.
By the end of this article, you will have almost all the necessary Logic on how Bitcoins come into play & replaces the traditional banking system.
In the next topic below, learn how Bitcoin Works & what cryptographic functions it uses.
How does Bitcoin Works?
Bitcoin Technology uses double SHA-256 Hash functions, which is Cryptographically strong making the network secure.
The SHA-256 hash function was developed by the National Security Agency (NSA).
So what do these hash functions do?
This hash functions turn plain text or data into a random fixed set of characters to secure it from its original form while maintaining its integrity and improving its security.
A Bitcoin can be further broken down to the smallest denomination called Satoshi.
Which is equivalent to 100 millionth of a Bitcoin.The name “Satoshi” is derived from the Creator himself.
Moreover, this makes the Hash function Tamper-Proof and is suitable for this kind of job. Now read the list below to know furthermore about the Bitcoin generating process.
Now, to receive Bitcoins we need an Address. So, let’s learn a bit about it below.
What is a Bitcoin Address?
A Bitcoin Address is a unique identifier that serves as a virtual place to send or receive cryptocurrencies like Bitcoins.
For example, your phone number or your bank account number is truly unique. It’s the same for Bitcoins.
So actually, How does Bitcoin Address looks like?
A bitcoin address may look like a long random string. See a bitcoin address below:-
Bitcoin Address:- 1NPv5292fTRXQyaUJrdQvtV9Qw9Wk6kGAW
Indeed, there are different types of Bitcoin Addresses available like P2PKH, P2SH, & Bech32.
How to Identify a Bitcoin Address?
To Identify a Bitcoin Address, you should check whether a given string contains 25-35 alphanumeric characters or not.
Also, make sure that it doesn’t contain symbols or any special characters.
P2PKH - Pay to Public Key Hash Example:1EkG5ecKCQ5X3dFLozTsdcjEFoy2cHaAat P2SH - Pay to script hash Example: 3GNyEBqT6pPBtXfFFP5UabZh4DvULB5Aza Bech32 - Segwit Address Example:bc1qee8e409pznegh25xa0sghw45m2xkvda370kdax
You can identify them while looking at the prefix of the Bitcoin Address string.
- P2PKH Addresses start with “1“.
- P2SH Addresses start with “3“.
- Bech32 Addresses start with “bc“.
In the next section, you will learn how to Create a Bitcoin Addresses Online.
How to Create a Bitcoin Address Online?
Creating a bitcoin address can be done using various methods, but as you are new to Bitcoin World. We will use an online method for creating a bitcoin address.
To Create a Bitcoin Address, do the following.
- Go to the bitaddress website & hover randomly the mouse over the page.
- It will generate some randomness and hover randomly till it reaches 100%.
- Lastly, Copy the Bitcoin Address and Bitcoin Private key.
Now, that you own a Bitcoin address make sure to keep the private safe. The Bitcoin Address is used for receiving Bitcoins and the Private key for sending out the bitcoins.
If you want to create P2PKH, P2SH & Bech32 types of Bitcoin addresses then do read this article on our website. Link – Create Bitcoin Address online.
In the next section, check if using Cryptocurrency like Bitcoin is legal or not in your country.
Is Bitcoin Legal in your country?
Usage of Bitcoin is legal to use in many countries and is a trend in the digital economy for the future. For this, you have to check with the local government website of your country.
To date, Bitcoin technology has replaced many traditional banking systems, which might introduce a downfall for Government owned banking systems.
Owning a bitcoin can make rich or poor in a matter of minutes as bitcoin price is very volatile.Every New Technology comes with a drawback.
So, Some countries have restricted the use of bitcoin because it uses high electric energy to power up the mining equipment.
Countries like China have banned bitcoin mining currently due to money laundering, illegal fund-raising, and criminal activities.
Yet, Startups & Entrepreneurs are finding new ways and innovations using bitcoin technology to solve payment problems. Still, One should check with the government laws in their own country to use them wisely.
Now that you have gained so much knowledge about Bitcoins. Also, it’s important to keep you informed about the Official Bitcoin Website. So, Read below.
What is the Official Bitcoin Website?
Yes, it’s equally important to know the official bitcoin website to avoid counterfeit or fake similar bitcoin sites.
To visit the Official Bitcoin Website, Go to the bitcoin.org website.
There you can find a list of original bitcoin wallets for your preferred Operating Systems. The website documents a lot of Bitcoin articles like types of Bitcoin wallets, Bitcoin setups for various operating systems, Hosting a full node for Bitcoin, etc.
Lastly, as I promised how to get free bitcoins? Read below.
How to Get Free Bitcoins for a Lifetime?
There are many websites on the internet, but I have picked the eldest & successful running Bitcoin faucet for getting free bitcoins.
I have withdrawn a lot of bitcoins from here, and hence it is authentic in payouts.
To get free bitcoins, do the following.
- Go to the FreeBitco.in website & register with your email address.
- Complete captcha & press the roll every hour to a get small amount of bitcoins(satoshis).
- Withdraw when you have almost 0.00030000 satoshis.
We have covered so much in this crypto article, Let’s close it with a conclusion. So, take a step further to read the conclusion below.
Bitcoin technology solves great problems over the traditional banking system and has more potential solutions for startups and tech companies.
Even Banks are secure but charge huge amounts of annual maintenance charges. In the case of Bitcoin, you have full control of your funds, but you have to take care of security yourself.
Now that you got an idea, what is Bitcoin & how does it works? Try to use this technology for future projects as it is open-source software that can bring a global impact.
– Neither the author nor editor here is responsible or liable for any of your investments. You must consult your financial advisor.