What Are Bitcoins And How Do They Work?

Image Source: Flickr

Cryptocurrency has been a booming industry for quite some time now, and the largest currency and also the oldest is called Bitcoin, although there are many different Cryptocurrencies available. If you have heard the name Bitcoin in the media and have a basic idea of what it is but do not know how it works, here is a summary of the history of Bitcoin and how it works.

 Bitcoins Origins

The brains behind Bitcoin remains a bit of a mystery, all we know is that a software developer who went by the pseudonym Satoshi Nakamoto first came up with the idea in 2008. The original concept was to create an electronic payment system where you could exchange currency which was independent of any centralised authority and entirely immutable. The exchange was to be electronic based and wholly secure and verifiable. Nowadays, many businesses deal in Bitcoins, and you can buy and sell them with ease at websites such as https://bitcoindealers.com.au/buy-bitcoins.html.

How Bitcoin Works

There is a limited production of Bitcoins, and only a few coins are released every hour, and there will only ever be a maximum of 21 million Bitcoins. As Bitcoins are decentralised, no single authority controls the network, so the value of Bitcoins is derived from the demand in the market. When exchanging Bitcoins, you are cutting out the usual middleman with money transfers which are the banks, as each transaction is done directly with the other party and anonymously. With this type of system, it is easy to transfer money without leaving a record, which is why it is looked down upon by many banking institutions and governments.

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 The First Bitcoin Trade

The first exchange of Bitcoins happened in 2010, where a man said he would pay 10,000 Bitcoins if someone could deliver a pizza to him. His request was answered when a man paid a local pizza company to make a delivery and he received in exchange 10,000 Bitcoins. If the hungry man had kept hold of those Bitcoins, they would currently be worth over 44 million dollars.

An Immutable Transfer

 Unlike when transferring traditional Fiat currencies electronically, when transferring Bitcoins, it is a permanent transfer, which means that it is not possible to reverse. The reason for this is that there is no central authority acting as a middleman in the transfer, as the exchange happens between two parties Bitcoin wallets directly. Although this may make some people feel uneasy, it also gives you the added peace of mind that no transaction can be tampered with by anyone.

Bitcoins Allows Micro Transactions

 Another benefit of Bitcoins is that they allow people to make micro-transfer that would not be possible with traditional Fiat currencies. A Satoshi is the smallest Bitcoin unit. Its value is a hundred millionth of 1 Bitcoin. Back in January 2018, this gave the value of 83 Satoshi at about $0.015, and with these values you can then do a micro transaction in theory. 

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All you need to start using Cryptocurrencies is a wallet, with that you can then begin to buy and sell Bitcoins, or use them as another form of payment. More and more businesses are accepting Bitcoins as payments. For more information on what Bitcoins are and how they work, the bbc.co.uk website has plenty of information on the subject.


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