BITCOIN is a type of new age digital currency which is universally known as the cryptocurrency. It is a worldwide payment system where the transactions occur directly between users to users without any central bank or government administrative, similar to gold or diamonds. It was invented in 2009 as an open-source software by an unknown person or a group of people under the name of Satoshi Nakamoto.
Bitcoin is created by a process known as mining, in which a mathematical problem is given to the computer to solve and the goal is to find out a 64 digit number. If the computer is able to solve the mathematical algorithm successfully then the user is rewarded with a Bitcoin. The network automatically increases the difficulty of the mathematical problem time to time, thus a solution is created at a regular intervals of roughly 10 minutes. This process of generating Bitcoin is known as mining because there are a certain number of Bitcoins that will ever be mined in the entire lifetime, that is, 21 million Bitcoins. Thus, as the number of Bitcoins generated increases the difficulty of mining a Bitcoin also increases, respectively.
All the Bitcoin users in the world are connected through a common network known as Block Chain, which constitutes of a public ledger were the users can find all the Bitcoin transactions that occur around the world. This eliminates the need for a central bank for the users, as the users become their own bank.
In early days, the Bitcoin miners used their computer processors to solve the mathematical problems and hence mine the Bitcoin. Later on, it was found out that the graphics cards used for gaming purpose help in mining Bitcoins at a faster rate but the problem faced with it was that it produced a large amount of heat. Thus, this led to the manufacturing of a special chip which is installed in the computer exclusively for mining Bitcoins at a faster rate but this also caused higher power consumption which led to the discovering of ASIC (Application – Specific Integrated Circuit Chips). This technology made the Bitcoin mining faster than before.
BITCOINS are stored in a ‘digital wallet’ which acts as a bank account, an individual who owns a particular digital wallet can transfer the Bitcoin to any other user or purchase products or services or even save their Bitcoins. The digital wallet exists either in the computer system of a user or in a cloud.
Over the years, Bitcoin has found huge popularity among people all around the world because of several reasons.
Some Features of Bitcoin
- Bitcoin is considered as a great medium of investment especially as the price of Bitcoin from 2009-2017 has been increased immensely and hence have been found highly profitable.
- The inventors of Bitcoins believes that in the future Bitcoin is going to revolutionize the financial system of the world, as the Bitcoin transaction doesn’t include government or any bank, users are directly connected with each other and it is also a cheap way of transaction.
- Bitcoin give the freedom of payment to the user, as the user can do transaction in any part of the world, at any time without any restriction.
- Bitcoin gives the user full control and all the transactions that occurs are transparent to all the users in the world.
But it is found that Bitcoin is not always perfect and in some cases it can create problems to users.
Some Issues Related to Bitcoin
- Bitcoin digital wallets if exist in the cloud then they can be hacked or if they exist in the computer then the wallet may be lost due to virus that effects the computer, so in both the scenario there is a danger of losing the wallet and hence losing the Bitcoins.
- All the Bitcoin transactions that occur are recorded in a public ledger but the names of the people involved in the transactions are not revealed and hence cannot be traced back thus making it an easy way for illegal purchasing of goods and services online.
- One of the other issues that is dealt with Bitcoin transactions are that they are irreversible that means once a transaction occurs only the users who is on the receiving point of the transaction can refund it. Therefore, if it goes to a wrong user then getting the refund is something almost impossible and hence the user can face a huge loss.
Understanding Bitcoin is difficult and it takes a little time for anyone to crack it. As we saw, Bitcoin has its pros and cons making it imperfect but for something which is still at its early stage of development and is a young currency, Bitcoin has surely done a good job.
Before coming with a decision whether Bitcoin is good or bad, it is important to remove all preconceived notions of the concept of digital currencies and thoroughly go through all the pros and cons of Bitcoin. Understand it, then take a Decision!
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