How Bitcoin Works
How Bitcoin Works
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The digital currency known as bitcoin has been used for several purposes since its introduction in early 2009. As a form of tender, it has found itself utilised as funding for cash transactions, as well as a source of investment. Unlike other types of currency, bitcoin production has a peak and once the amount of digital coins available reaches 21 million, the creation of new ones will cease.
Why Does Bitcoin Peak?
Generally speaking, bitcoin isn’t considered an official form of currency and is instead used to trade, buy, sell and invest by those that have access to them. In order to create a coin, a programmer will need to ‘mine’ it. This process can be very technical, with individual pieces of code needing to be created. Once complete, the encrypted bitcoin will become available.
What happens next with Bitcoin?
Once a coin is mined, it will have been rigorously tested to ensure that no duplicates can be made – making this form of currency one of the most secure in the world. As they can’t be cloned in any way (due to the fact that each coin will possess its own unique string of coding), this can allow the total number in circulation to be managed and maintained.
Technically speaking, other forms of currency have little to no records regarding the amount in circulation at any given time.
Bitcoins on the other hand are documented, and their whereabouts are easy to decipher – mainly because of each coin possessing its own rendered code. It’s this code that can be transferred from one account to the next; making it easy to interact and transact with this currency for those that have dedicated bitcoin wallets.
What’s a bitcoin wallet?
In the simplest terms, a bitcoin wallet is a digital piece of software that’s capable of storing bitcoins specifically. Their information is stored digitally, allowing the owner to access their wallet in much the same way as they would when banking online. Furthermore, if the owner wishes to send bitcoins to another wallet, they will simply need the recipient’s information to do so.
How does the process work?
Once a bitcoin is in a person’s digital possession, they can choose to keep it, sell it for another form of currency, or trade it for a particular service or product. In any event, the value of a single bitcoin will typically be calculated based on the current level of demand. As of 2017, bitcoins were being sold for anywhere between £800 and £1000 GBP, although this price can fluctuate depending on the seller, or how much the buyer is willing to pay.
With a transaction agreed, the owner will be able to transfer any number of bitcoins to their recipient’s account just as they might do when banking online.