Things You Need to Know About the Workings of Bitcoin

Things You Need to Know About the Workings of Bitcoin

It is common knowledge that blockchain is considered the technological revolution of this age. From that perspective, one cannot disregard Bitcoin’s role since it is the crypto that started it all. Although blockchain technology’s ideation happened as early as 1991, Bitcoin will remain the first successful implementation of the technology that initiated the blockchain innovation. In this article, we will discuss how Bitcoin works.

How can one buy Bitcoin?

Bitcoin is both a digital currency as well as a payment network such as PayPal. It is a global currency that is traded peer to peer without a central bank or authority’s need or existence.

To buy a Bitcoin first, one has to install a virtual wallet on a computer or mobile. The wallet is much similar to that of personal finance software. It keeps track of the Bitcoin balance as well as all the transactions that take place.

The real monetary balance should be deposited via an online payment company. Or else one can get it transferred from a traditional bank account into an account on a website. The website in question has to connect Bitcoin buyers and sellers.

After the funds are made available to the buyers, they can place the order for Bitcoin, similar to the trading stocks via an exchange like Bitstamp. You can also buy Bitcoins from a third party, for example, Bitinstant. That sends the crypto to the wallet.

There is a total number of 21 million Bitcoins in existence, and no one can create more. Since the number is limited, the value of Bitcoin keeps fluctuating; as for a currency to maintain its value, the supply must be finite.

One of the drawbacks of Bitcoin is that it has fungibility issues. This is due to the traceability feature. When a Bitcoin transaction occurs, the trading can be traced from one wallet to another, even to the date that it was mined first. If one uses the coin for unfavorable services, that becomes an open thing in the blockchain. Such a thing can tarnish the history of the crypto making it less valuable than the others.

Though there are issues with Bitcoin, there is active trading globally by peers who think it to be a viable investment.

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