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How does Bitcoin work?
I've mentioned, it's not essential to understand exactly how Bitcoin works to use it. That said, knowledge is power and I personally find it fascinating.
Bitcoin is actually built on a much broader technological advance known as Blockchain.
What is Blockchain?
Blockchain technology is a super-secure way of publicly verifying the transfer of information between two parties.
When a transfer takes place, a block is added to the chain chronologically. Each block contains sets of data relating to the transaction, and also relates to the previous block with a cryptographically generated signature. It's this signature that locks (or chains) all the blocks together, so that a block can never be modified once it's created.
Seen as a kind of public ledger, a Blockchain is stored in the cloud across thousands of computers around the world. The mix of the chain being decentralised and blocks bound together makes Blockchain technology practically unhackable.
Bitcoin was the first and most popular implementation of Blockchain. When you send some Bitcoin to another person, the transaction will be verified by lots of computers in the Bitcoin Blockchain and create a new block.
But in fact any form of transfer that requires validation can utilise the technology, anything from licensing music, sharing medical records to buying a house.
Ethereum is another kind of cryptocurrency that also goes beyond money to handle ‘smart contracts'. This means a legal document such as the transfer of Title Deeds can be quickly validated for a property sale, for example.
Even the British government are being encouraged to adopt Blockchain.
Whilst it's still early days, some experts predict that Blockchain technology will lead us into a “trust” revolution, following on from the industrial and informational revolutions.
Where do Bitcoins come from?
New Bitcoin is created as a result of ‘mining', which is conveniently also the way that every Bitcoin transaction is processed and verified.
For every transaction, mining computers must solve very complex mathematical problems and generate a 64 digit solution. Once solved, one block is added to the Bitcoin chain and the miner earns a certain amount of new Bitcoin as a reward.
The Bitcoin Blockchain is programmed to only ever release 21 million Bitcoins. Once they've all been mined no more will ever be created.
This is estimated to happen by July 2020. At time of writing there are over 16.7 million in existence
I've mentioned, it's not essential to understand exactly how Bitcoin works to use it. That said, knowledge is power and I personally find it fascinating.
Bitcoin is actually built on a much broader technological advance known as Blockchain.
What is Blockchain?
Blockchain technology is a super-secure way of publicly verifying the transfer of information between two parties.
When a transfer takes place, a block is added to the chain chronologically. Each block contains sets of data relating to the transaction, and also relates to the previous block with a cryptographically generated signature. It's this signature that locks (or chains) all the blocks together, so that a block can never be modified once it's created.
Seen as a kind of public ledger, a Blockchain is stored in the cloud across thousands of computers around the world. The mix of the chain being decentralised and blocks bound together makes Blockchain technology practically unhackable.
Bitcoin was the first and most popular implementation of Blockchain. When you send some Bitcoin to another person, the transaction will be verified by lots of computers in the Bitcoin Blockchain and create a new block.
But in fact any form of transfer that requires validation can utilise the technology, anything from licensing music, sharing medical records to buying a house.
Ethereum is another kind of cryptocurrency that also goes beyond money to handle ‘smart contracts'. This means a legal document such as the transfer of Title Deeds can be quickly validated for a property sale, for example.
Even the British government are being encouraged to adopt Blockchain.
Whilst it's still early days, some experts predict that Blockchain technology will lead us into a “trust” revolution, following on from the industrial and informational revolutions.
Where do Bitcoins come from?
New Bitcoin is created as a result of ‘mining', which is conveniently also the way that every Bitcoin transaction is processed and verified.
For every transaction, mining computers must solve very complex mathematical problems and generate a 64 digit solution. Once solved, one block is added to the Bitcoin chain and the miner earns a certain amount of new Bitcoin as a reward.
The Bitcoin Blockchain is programmed to only ever release 21 million Bitcoins. Once they've all been mined no more will ever be created.
This is estimated to happen by July 2020. At time of writing there are over 16.7 million in existence
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Thank you so much for such an informative post! A new technology that is highly rampant in the IT Sector nowadays is Blockchain! Get to know more about this from the top Blockchain development company
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