Bitcoin is a digital currency. You can process transactions in a peer-to-peer network with it. Thus, it is not subject to any central authority. So it is based on the blockchain technology and is limited by a software.
How does Bitcoin work?
Bitcoin is a cryptocurrency and works as an account book. A peer-to-peer system executes all public registered transactions and is, therefore, a network consisting of several computers. Thus, users monitor all transactions. So all transactions are visible to you and everyone else. The transfer is cryptographically secured, so coins can safely be sent.
For this purpose, you can use digital key pairs, consisting of a public and a private key. So you can use the public key for receiving and sending the digital currency. And the private key is for the authorization of your transactions.
How do I receive and transfer Bitcoins?
So there are two different ways to receive bitcoins. Either you can buy them from other users or you mine them. When mining your computer solves a complicated mathematical problem. Therefore the system validates and saves your incurred transactions. So if you are the first person to solve the problem you will get a coin.
So to get coins and participate in the system, you need a digital wallet. Thus, he is comparable to your bank account. There you can keep your corresponding private key. So now you are ready to receive and send bitcoins.
What are the advantages of Bitcoin?
Bitcoin is decentralized and does not require a controlling instance. So this leads to a cost-effective system. And therefore allows you to make fast transfers. As a result, the system saves and reviews all transactions. So all payments are transparent. Therefore, all network members check and verify each other. Thus, nobody can cheat and that is why you can trust Bitcoin!
“Bitcoin explained simply” – Let’s summarize
- Bitcoin is a digital currency
- So it is based on the blockchain technology
- Therefore there is no central authority
- A peer-to-peer network processes and checks your Transactions
- So all transactions are transparent
- As a result, it enables fast and secure transactions