What Is Bitcoin And How It Is Spent?

What Is Bitcoin And How It Is Spent?
What is Bitcoin

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Bitcoin was a platform launched by a person (or a group) called “Satoshi Nakamoto” in 2009 for ‘mining’ a virtual currency known as ‘bitcoin’. It is not paper money or minted coin issued by the government. It’s important not to confuse ‘Bitcoin’ and ‘bitcoin’ as they differ from each other. Bitcoin is a platform while bitcoin (lowercase) is a virtual currency or a digital currency that can be earned, purchased or traded in different ways.

Let’s first understand ‘mining’ of bitcoin and why are they mined instead issued by a central authority like a central bank.

In 2009 a man or group who called himself/itself ‘Satoshi Nakamoto’ (not the real name) wanted to create a virtual or electronic currency, which would be managed automatically with the help of software and without any interference from a third/external party. As bitcoin are not paper currency, they cannot be issued, instead they can only be ‘mined’ by miners. Miners are the people who manage powerful computers to solve complicated mathematical algorithms. Hundreds of thousands of miners sit simultaneously to mine bitcoin and those who complete the algorithm first get the opportunity to have bitcoin in their virtual account or wallet. Miners get 12.5 bitcoin at first and subsequently, this number gets reduced with each mining.

It is interesting to note that a total of 21 million bitcoin were released by Satoshi Nakamoto and that is why miners can mine only up to this fixed number of bitcoin. Till now 12 million bitcoin have been mined. Therefore, the price of every bitcoin is determined by demand and supply mechanism of the market. In January 2017, for the first time the price of a single bitcoin crossed $1,000 and till December of the same year, its price reached $ 19,000/bitcoin. Now that is incredible, isn’t it? The reason is simple. There is a limited number of bitcoin available and purchasers are increasing every day.

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How does it work?

Mining of bitcoin runs on an unbreakable ‘Blockchain Technology’ which is a distributed, open ledger account which keeps updating itself whenever a transaction happens and every participant is the part of this ledger. Wherever and whenever a transaction happens, it is recorded automatically and it cannot be changed or broken by anybody. It records every transaction and keeps the data within a ‘block’ and it gets added at the end of the transaction chain. Hence, this block chain is a huge record book of every transaction of bitcoin that has ever happened.

Mining of bitcoin has turned early miners, technological pioneers and early investors into billionaires and Satoshi Nakamoto into a billionaire many times over.

If an ordinary person wants to get a bitcoin, they don’t necessarily have to be miners. The currency is traded in bitcoin exchanges like Coinmama or Coinbase and can be purchased or invested in by the common man. It can be sold or spent on multiple products available online where online sites accept bitcoin like a fiat money in exchange for products or services.

We provide you with the training you need to understand cryptocurrencies at our what is bitcoin education company!

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