How Exactly Does Bitcoin Work?

If you are one of those people who are not technically minded, it can be a real challenge to fully understand how digital currency works, after all, it has no real form, and is made up of only ones and zeros. Before we take an in-depth look at Bitcoin, let us examine fiat currencies like the US and Australian dollar, which use paper notes and coins that have a specific value. When you look at a $100 dollar bill, you are looking at a promise by the issuing government to pay the holder of that note the sum of gold that is equivalent to the amount of money. There was once a time when all fiat currencies were backed by gold reserves, yet that policy was removed many years ago, thus allowing governments to print as much money as they wish.

Blockchain Technology

To understand Bitcoin, you first need to grasp the principles of blockchain technology, which works by linking blocks of data to each other. Once a block is in the chain, it cannot be altered, as each block of data relies on the block before and the block after, and the only way to change the ownership of a bitcoin is to add a new block of data that transfers the ownership to another individual or organisation.

Decentralised Public Ledger

Bitcoin runs on open source software which is decentralised, allowing all users access to the data, and when a Bitcoin transaction is carried out, all the user devices on the entire network have to agree and accept the new data that is added to the registry. This is all done automatically, and the problem of double payments has been solved, and Bitcoin allows people who don’t know each other to transact, as there is no need for trust.

How to Get Started

If you would like to buy Bitcoin in Sydney, there is a local Bitcoin dealer with offices in the CBD, where you can go and buy as much Bitcoin as you wish. They would be able to answer any questions you might have, plus they can show you how the software works, and once you have made a Bitcoin purchase, you can buy or sell your Bitcoin through the dealer’s website.

The Risks

Bitcoin, like any other commodity, is subject to price fluctuations, yet unlike fiat currencies, Bitcoin is not linked to any nation’s economy, and the price would very much depend on supply and demand. The experts all agree that the Bitcoin network in un-hackable, so you will never have to worry that your wealth is hacked, and the only way that you could lose your Bitcoin would be if you happened to lose your private digital key. You are advised to have several copies of your private key stored in several locations, which will ensure that your Bitcoin is always accessible.

When you send Bitcoin to another user, the funds are transferred instantly, and there is no going back, as the transaction is recorded on the public ledger, so you need to be 100% sure before you hit the send button.

 

 

 

 

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s