ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

How does Bitcoin Work?

Updated on April 14, 2015

Are there other currencies like Bitcoins?

Yes there are. Like Bitcoin, other crypto currencies are also mined through various procedures that use computing resources to find solutions to a complex problem. The detail process of mining and Bitcoin creation is described below. Economically Bitcoin is represented as BTC. 1 BTC is valued at $298.65 at the time of this writing. Like other currencies, the Bitcoin prices also vary depending on market demand and transactions made using the crypto currency.

What is Double Presence?

Bitcoin achieves another major flaw mostly prominent with digital data called double presence. For example, when you send a file to your friend, how would other users guarantee that you don’t have a copy of that file with you? Similarly when you send some money to your friend, a copy of the currency stays in your system. Therefore, both of you can spend the same amount of money. Bitcoin perfectly eliminates the problem by introducing the ledger called blockchain. Every transaction that is carried out by a user sends an encrypted string to Bitcoin servers all around the world to verify that the same currency doesn’t exist with more than one user.

What Happens After the transaction is verifies?

Once the transaction is verified, it is listed on the block chain with the cryptographic string from both the users. This avoids double spending and secures the currency from getting wiped out. As each transaction made is unique and reduces the amount of Bitcoins from user while increasing the same amount of Bitcoins with the other, financial integrity is maintained and users maintain a perfect financial flow.

Then What Happens When I am Transacting With Traditional Currencies?

When you are transacting through PayPal or any other payment processor, the transaction is reversible. That means, one a user has sent you some money, he can take that money back regardless of whether you were supposed to have it or not. Therefore, reversible transactions pose a significant challenge for both the sender and the receiver. Unlike usual transactions, Bitcoin transfers are permanent and irreversible. Therefore, once a sender has sent you some amount of money and the amount has been verified with the blockchain, he cannot take it back. Unless of course you send it to him again

Then How Is Bitcoin Manufactured?

The huge network of Bitcoin servers that continuously mines and computes solutions to problems generated by each transaction, carries out the verification process within 30 minutes of transferring the amount. This eliminates any possibility of bounced checks or other such disappointments between the sender and the receiver. Along with that, unlike traditional currencies, there is no such thing called a fake Bitcoin. No organization or individual can create or circulate fake Bitcoins as every Bitcoin is generated and transferred after thorough verification of cryptographic problems across thousands of servers distributed all over the world.

The ledger system employed by the Bitcoins system allows users to easily verify the balance contained by individuals or organizations through their public address. Therefore you can easily transact with an individual who has the required amount with him and can avoid any fake users who claim of having a lot of money while actually they don’t. This clears the air and builds trust among users while transacting business over the web. The negligible transaction period and the lack of a prolonged settlement period speeds up the whole process and avoid any unnecessary transaction related problems that are common on the web.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)