What is Bitcoin and How A Bitcoin Transaction Works?
So you just came to know about the buzzword Bitcoin (BTC)? In recent years what is Bitcoin and Cryptocurrencies have become a popular question among the young and old. Are you searching how a Bitcoin transaction works? How is money transact from one person to another securely and without any involvement of the third-party? You can get your hands on cryptocurrencies without understanding the technical details. Although, if you still wish to browse through this technology, then you have come to the right place.
Bitcoin is a digital currency, that means it is virtual in existence. It is a peer-to-peer version of electronic cash. It allows online payments to transact directly from one party to another without going through a financial institution such as Banks. The coin came into existence by an unknown programmer or a group of programmers with nom de guerre Satoshi Nakamoto in 2009 through an open source software.
It is widely believed that Satoshi created it due to the global recession of 2008. Bitcoin is deflationary in nature, unlike fiat currencies. Because of the recent hype and the financial freedom it brings. The currency has evolved as one of the largest Cryptocurrency backed by many financial institutions.
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The key features Bitcoin
- It is a peer-to-peer network
- It’s an open source software, and anybody can fork it.
- The ledger is not private, and anyone can see or browse any transaction made on the network. However, the identity of the person is hidden.
- Since there is no central authority to control the network, anyone can become a miner
- Any person can send a transaction over Bitcoin’s network without prior approval or fulfilling any formality
- It enables people to have more control over their finance activities
As a fact, What is Bitcoin is becoming a popular trend in Google search engine. The interest around it and other Cryptocurrencies have exponentially skyrocketed within the past two years, and many small and large scale enterprises now accept Bitcoin as a form of payment. Besides, Bitcoin has also established itself as an asset having intrinsic value.
How a Bitcoin Transaction Works
For many, it would be as simple as making an online purchase or doing internet banking. But when we talk about the Blockchain technology, there are many other factors in consideration.
When any one of us creates a transaction, it is relayed to Bitcoin’s network. The Bitcoin nodes present around the world accept the transaction after which it is added in a large mempool also called a Memory pool. Here comes the process of Bitcoin mining. Mining is a process of confirming Bitcoin transaction to make the Blockchain more secure and robust. It also helps to make it harder for people to revert their transaction and securing the network
In fact, mining is one way that can impact Bitcoin’s price and is the core answer as to how a Bitcoin transaction works. Once, a user initiate transaction on the BTC network, it waits in mempool until it makes it to the block. A BTC Block is concise in size and can only store a finite amount of transactions. The average memory of block is 1MB.
This means a block cannot carry more than this amount of data at a given time. The block generation rate of Bitcoin is also fixed at an average of 10 Minutes. Besides, Block generation rate, mining fees, and network congestion also add up to the time it can take for BTC transaction to receive confirmations.
Bitcoin mining includes several miners running their hardware to validate the transaction. These are the people who use electricity and hardware to mine Bitcoin. In return, they are awarded newly generated Bitcoins. This means if ever we have no miner running their machines to solve complex algorithms, then good luck sending your Bitcoin to your favorite store.
Wrapping it up, what is Bitcoin has become a popular search term among the netizens. Besides, the currency is one of the fast and secure methods to transfer your money from one location to another. It also enables common people to have more financial freedom for themselves. Traditional bank charge unnecessary fees on your transaction, which is certainly spiteful. In addition, they also control your fund and use them to invest in a variety of options such as stocks, bonds, etc. And what you get in return? Some PEANUTS!