In this article, we will understand Bitcoin and its associated terminology in a very simple language
Bitcoin
Bitcoin is a cryptocurrency which is using Cryptography, and Blockchain. Let’s understand what Cryptocurrency, Cryptography and Blockchain are
Bitcoin – Cryptocurrency
This is a form of currency which is not backed by government and is digital in form. It follows decentralization. In Decentralization, the control of currency is not with single entity like Bank.
In banks, when money is debited or credited, a record will be created for each transaction in the digital ledger. Ledger holds all the debit and credit transactions of the account holders in that bank. This digital ledger will be stored only in the bank data base and not easily accessible by general public
But in bitcoin world, the digital lender will be shared across the network of computer. So that all the transactions will be transparent to everyone. Only the sender and receiver details will be not known. With this background, let’s look at Blockchain now
Bitcoin – Blockchain
Blockchain is all about connecting these digital ledgers. So, when any transaction happens, that transaction gets registered in the digital ledger as block.
The subsequent transactions will be connected to the prior transaction like a chain. Hence the name Blockchain. To put it simply, think of it like a ledger Lego blocks distributed to all the computers in the network
Cryptography
Cryptography in cryptocurrency is used for secure transactions. It uses a combination of public and private keys to create the blocks in the blockchain
They rely on hash functions and these hashing is used to link blocks in blockchain, verify the integrity of transaction data and ease Proof of Work mechanisms
Conclusion
This cryptocurrency arose from a loss of trust in the government and wealth concentration among a small segment of the population. Bitcoins are only finite in number, thereby it is right now resistant to inflationary pressures. It means that the value of this will not degrade with time like Fiat currency.
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