Cryptocurrency is an encrypted, decentralized digital currency that is transferred from one person to another confirmed in a public ledger in a process called mining. No government issued money backs the numbers in the ledger – instead, Bitcoins, the most common type of cryptocurrency is traded. Transactions take place without the need for an intermediary,
What are the benefits of using Bitcoin?
Bitcoin can be purchased for dollars, Euros, etc., making it easy to use from anywhere in the world. Your Bitcoins are stored in a digital wallet, and you’re able to purchase anything from anywhere at any time.
Other benefits of using Bitcoin include:
- Fees are lower than traditional banking institutions.
- Your account can’t be frozen.
- There are no prerequisites or limits.
Who maintains the ledger?
No single company or government entity controls the Bitcoin ledger. Maintainers, or people around the world who maintain the ledger, are sent a message each time a transaction is made. They each have a copy of the ledger and update it when they receive a transaction, but sometimes the ledgers show different balances. When this happens, a vote occurs by having each Maintainer solve a mathematical puzzle. The first group to finish this “mathematical race” determine how the ledger should read.
How is theft prevented with Bitcoin?
A signature is required with every Bitcoin transaction to confirm that the transaction is legitimate. This serves the same purpose as signing a check, but uses cryptography to prove ownership.
How is money created?
When ledgers are balanced through solving math problems, money is credited to their account. This acts as an incentive to having more Maintainers present. Every time someone wins the lottery to choose the next transaction in the chain, new Bitcoins are created out of thin air and added to that person’s account. Money is randomly distributed to the users who solve the problems.
Is Bitcoin money unlimited?
No. As of 2041, Bitcoins will stop being produced in this way, and Miners will only make money on the fees associated with transactions.
How is transaction order determined?
Unlike cashing traditional checks, determining the order in which Bitcoins were exchanged can be difficult to determine. Network delays can cause transactions to display differently all over the world. To keep everything fair, new transactions are entered into a pool of pending transactions. From there, a mathematical lottery is held that determines the order in which they enter the queue, creating a Transaction Train. A Cryptographic Hash is used to produce problems that need to be solved that connect transactions in a train, determining which is to come next.
To learn more about how Bitcoin and other Cyptocurrency can benefit your business, contact the experts at PCS.