Almost every other person around the world is aware of the terms Bitcoin and Cryptocurrency. But how many people truly understand the concept of blockchain anyway?
In the first quarter of 2022, Bitcoin hit $43,394.80 on the exchange market. Over the last few years, the popularity of cryptocurrency has gone sky high, and more investments are taking place via Bitcoin owners, miners, and enthusiasts. With a promising future and potentially rewarding investment plans, Bitcoin is becoming one of the most influential aspects of the economy that is taking place virtually.
As more and more people are investing in the blockchain market, the mass is slowly becoming a part of it. Before jumping into some trading plans, let’s start with the basics.
Brief concept of Bitcoin
- Blockchain ledger keeps growing up with the growing number of transactions and it is being constantly added whenever it takes place on the network.
- The name blockchain is derived from its working process. In this network, the transactions are grouped in blocks and the blocks are further connected to form a chain of blocks.
- Every transaction is secured by timestamp and hashtags to make sure records are stored in chronological order. As a result, all the records are immutable and permanent.
Three ways to acquire Bitcoins
- Purchase the coins on the exchange market
- As trading options to accept bitcoin in exchange for other products or services
- By mining new bitcoin
Bitcoin mining is quite an exciting option that helps miners to find a new path of discovery. However, it can be a daunting task as well since it requires very high computing skills and solving complex equations to verify the transactions in order to add them to the digital ledger of the blockchain.
What is Bitcoin?
Bitcoin is the first digital currency that is decentralized which means it promotes peer-to-peer transactions without any intermediate organization such as banks, agents, brokers, the government, or any other. The underlying technology of Bitcoin is quite advanced and allows the traders to make huge transactions without any obstacle of the geographic location. This advanced currency system is beyond tax or any other regulations.
Bitcoin also comes with various advantages
- Fast and secure peer-to-peer transactions without intermediaries
- A decentralized system so everything stays between the buyer and seller only
- It is cryptographically secure and the all the data is end-to-end encrypted
- It is accessible to the public and inability to counterfeit
- The transaction fees are fairly low considering the volume and the features
What are the four attributes of Blockchain?
As mentioned earlier, the blockchain consists of many blocks of grouped transactions which are connected with each other. Each of these blocks contains four primary attributes. Such as,
- Previous Hash – Hash is what keeps the blocks connected together. This attribute helps to store the value of the previous block and helps to make the connection.
- Data – it is referred to the set of transactions that have been mined, validated, and added to the block.
- Nonce – Nonce is considered a random value that is used to vary the output value of the hash. Bitcoin uses a consensus algorithm where Nonce works as the ‘proof of work’. As mentioned earlier, every block in the blockchain is supposed to generate a hash value nonce sets that parameter. It also verifies each transaction.
- Hash – Blockchain follows the SHA-256 algorithm and when the previous hash value, data, and nonce pass-through this algorithm to create this value. Hash is a digital signature of the block.
What is Bitcoin mining? Is it profitable?
Bitcoin mining is the process where the crypto transactions are validated digitally through the bitcoin network. It is further added to the blockchain ledger. The mining process includes solving complicated cryptographic hash puzzles which help to verify the block of the transaction. It is important to verify the blocks before adding them to the decentralized blockchain ledger. Solving the puzzles is quite intriguing and it requires many pieces of sophisticated equipment and powerful computing power. As a reward for solving the puzzles, the miners are rewarded with bitcoins. This whole process is known as bitcoin mining.
With the growing demand in the crypto market, bitcoin and other cryptocurrencies are gaining much profit. According, to a recent report, 85% of crypto trades offered much profit to the owners and the growing demand is establishing more profits in the future. It is evident that the crypto market can offer more benefits than normal market conditions.
What is the difference between Bitcoin and Traditional Currencies?
Almost every other person or trader has thought about this while evaluating the profit that can be gained from crypto trading. Let’s take a better look at the differences to figure out how safe it is to invest in Bitcoin.
Tangibility
Bitcoin is strictly a digital currency and does not of a physical medium of trading. On the other hand, traditionally comes in both digital and physical forms offering more convenience.
Regulation
Bitcoin has a decentralized distribution network with no intermediaries and is only issued through mining. Traditional currency is issued and regulated by the Government authorities, central banks, and so on.
Value
The value of bitcoin is directly proportionate to the users who trust it. Value is backed by a lack of trust and investment and it gets stable with more bitcoin transactions. In the case of Fiat currency, the value is set by the forces of supply and demand. It is vulnerable to inflation and price drop.
Supply
Bitcoin is currently capped at 21 million while fiat currency has no supply limit.
Security
The traditional currency can be negatively affected by fluctuation or a change in government policy. Bitcoin offers more security through its system of decentralization and cryptography.
Like every other investment plan, Bitcoin mining and crypto-assets contain a few risk factors as well. However, with the flux of change in the economy; perhaps Bitcoin is the next future everyone looking forward to.
