Bitcoin : The Virtual Mystery !!

     

      

Amazed by witnessing people doubling,tripling or in extreme cases making ten times a question which comes straight to my mind when ever I hear something geeky as virtual money is “What the hell is a bitcoin?”

Well this answer comes from the core crests of our financial system with an amalgamation of the geekish technological advance which fosters and innovate things and concepts which were unthinkable in the times of my grandfather, well to be true even in the times of my father .

About Bitcoin - A currency in rage

Bitcoin is a digital currency,  which means that unlike traditional currency it isn't physical in form of notes or coins rather  it’s virtual money controlled and stored entirely by computers spread across the internet, An idividual can store it in his hard drive. You must be thinking it as an analogous to your smart cards which you refer as plastic money but trust you me Bitcoin is one such cobweb which is complex beyond means and thoughts of not so geek man like me.


With that in mind, expertMasterji gives you this: All about BitCoin for dummies. 

Bitcoin isn’t just a currency, like dollars or euros or yen. Just like an idea it is abstract, mobile and lastly what everyone fears : it is vanishable.

Elemental knowledge about Bitcoin 

 It’s a way of making payments, like PayPal or the Visa credit card network. It lets you hold money, but it also lets you spend it and trade it and move it from place to place, almost as cheaply and easily as you’d send an email.

• Hedious Transaction but its not all-evil

Bitcoin lets you make transactions  without revealing your identity, thus making it more suitable than customary currency. Now since there is no record of people involved in transaction of this virtual currency, it was welcomed with garlands by the mafia and drug lords. A phenomenon which deserves to be brought into light here is its  use on The Silk Road, an online marketplace for illegal drugs. 


But at the same time, it’s a system that operates completely in the public view. All Bitcoin transactions are recorded online for anyone to see, lending a certain transparency to the system, a transparency that can drive a new trust in the economy and subvert the anonymity sought by those on The Silk Road, which the feds shut down last month.

•  Currency without borders

 Bitcoin is  a re-imagining of international finance, something that breaks down barriers between countries and frees currency from the control of federal governments. Bitcoin is controlled by open source software that operates according to the laws of mathematics — and by the people who collectively oversee this software. The software runs on thousands of machines across the globe, but it can be changed. It’s just that a majority of those overseeing the software must agree to the change.

Origin of the Bitcoin

Once upon a time there was a geek whose only thought was to create a ripple in the financial system as it was so very unjust to poor any needy and moreover controlled by the elite class and so he along with his fellow nerds started a quest which would eventually turned out to be a lot more than a ripple.

Actually all this is not true what happened was that  half a decade ago, Satoshi Nakamoto(pseudonym)  an anonymous computer programmer or group of programmers built the Bitcoin software system and released it onto the internet. It was designed to run across a large network of machines — called bitcoin miners — and anyone on earth could operate one of these machines, they were simple to operate and required no rocket science and thus a network was created..

This distributed software seeded the new currency, creating a small number of bitcoins. 

Understanding Bitoin in detail

Basically, bitcoins are just long digital addresses and balances, stored in an online ledger called the “blockchain.” But the system was also designed so that the currency would slowly expand, and so that people would be encouraged to operate bitcoin miners and keep the system itself growing.

When the system creates new bitcoins, you see, it gives them to the miners. Miners keep track of all the bitcoin transactions and add them to the blockchain ledger, and in exchange, they get the privilege of, every so often, awarding themselves a few extra bitcoins. Right now, 25 bitcoins are paid out to the world’s miners about six times per hour, but that rate changes over time.

Come on - Not again - The same demand and supply CONUNDRUM

All said and accepted but the question remains unanswered : Why do these bitcoins have value? 

It’s the same old demand and supply thing. Bitcoin has  evolved into something that a lot of people want — like a dollar or a yen or the cowry shells swapped for goods on the coast of Africa over 3,000 years ago — and they’re in limited supply. Though the system continues to crank out bitcoins, this will stop when it reaches 21 million, which was designed to happen in about the year 2140.

The idea was to create a currency whose value couldn’t be watered down by some central authority, like the Federal Reserve.

When the system quits making new money, the value of each bitcoin will necessarily rise as demand rises ( it’s what’s called a deflationary currency ) but although the supply of coins will stop expanding, it will be still be relatively easy to spend. Bitcoins can be broken into tiny pieces. Each bitcoin can be divided into one hundred million units, called Satoshis, after the currency’s founder.

 

The Handy bitcoin utility use :

How do you spend bitcoins? Trade them? Keep people from stealing them? Bitcoin is a math-based currency. That means that the rules that govern bitcoin’s accounting are controlled by cryptography. Basically, if you own some bitcoins, you own a private cryptography key that’s associated with an address on the internet that contains a balance in the public ledger. The address and the private key let you make transactions.

The internet address is something everyone can see. Think of it like a really complicated email address for online payments. Something like this: SDFVCEW3414VHRH54V3XDFHT. If someone wants to send you bitcoins, they need your address

If you want to send your bitcoins to someone else, you need your address and their address — but you also need your private cryptography key. This is an even more complicated string that you use to authorize a payment.

Using the math associated with these keys and addresses, the system’s public network of peer-to-peer computers — the bitcoin miners — check every transaction that happens on the network. If the math doesn’t add up, the transaction is rejected.

Crypto systems like this do get cracked, and the software behind Bitcoin could have flaws in it. But at this point, Bitcoin has been tested pretty thoroughly, and it seems to be pretty darned secure.

For the ordinary people who use this network — the people who do the buying and the selling and the transferring — managing addresses and keys can be a bit of a hassle. But there are many different types of programs — called wallets — that keep track of these numbers for you. You can install a wallet on your computer or your mobile phone, or use one that sits on a website.

With these wallets, you can easily send and receive bitcoins via the net. So you want to buy a needle , the store next door accepts bitcoin ;you thinking of buying your girlfriend an expensive necklace , just trade your bitcoin for money and buy her one and even simpler swap your bitcoin with the necklace with the merchant a few blocks away. Every passing day is adding a good number of bitcoin supporting merchants and every tick of minutes hand adds a good number of  miners who are investing their resources to have a slice of the bitcoin loaf.

.Be aware while Online transactions

Once you get your hands on some bitcoins, be careful. If somebody gets access to your Bitcoin wallet or that private key, they can take your money. And in the Bitcoin world, when money is gone, it’s gone for good.

This can be a problem whether you’re running a wallet on your own machine or on a website run by a third party. Recently, hackers busted into a site called inputs.io — which stores bitcoins in digital wallets for people across the globe — and they made off with about $1.2 million in bitcoins.

So, as their bitcoins start to add up, many pros move their wallets off of their computers. For instance, they’ll save them on a thumb drive that’s not connected to the internet.

Some people will even move their bitcoins into a real physical wallet or onto something else that’s completely separate from the computer world. How is that possible? Basically, they’ll write their private key on a piece of paper. Others will engrave their crypto key on a ring or even on a metal coin.

Sure, you could lose this. But the same goes for a $100 bill.

The good news is that the public nature of the bitcoin ledger may make it theoretically possible to figure out who has stolen your bitcoins. You can always see the address that they were shipped off to, and if you ever link that address to a specific person, then you’ve found your thief.

But don’t count on it. This is an extremely complex process, and researchers are only just beginning to explore the possibilities.