How does Bitcoin Work?
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.