A Closer Look at How the bitcoin Network Operates
Many people are curious about what is behind bitcoins. They may wonder how this virtual currency got its name. What does it stand for? And why is it becoming so popular today? This article will attempt to answer those questions and more.
To begin, bitcoins is an obscure nickname for the bitcoin protocol (which also goes by the various other aliases such as peer-to Peer, Dark Pool, Multi Currency Association and Super Wallet). The protocol itself is written in a highly abstract and generalized form called the bitcoin script. Basically, this script describes what happens in the bitcoin network, with each transaction a hash (an encrypted string of numbers and/or letters) that ensures the transaction has been both valid and effective. This hash system is one of the major differences between traditional computers and the bitcoin network. While both use similar methods to prove the legitimacy of transactions, the bitcoin protocol uses a different system for validation. This verification method is what allows the system to work as a “virtual cash processor.”
In essence, the bitcoin network works just like any other type of public ledger system. Transactions are listed, modified and recorded in a public ledger. Transactions occur with participants in the network who each own a computer with internet access. The software that runs on each computer broadcasts public key and private key data requests to be agreed upon by all parties. When a request is received, the computer that contains the keypairs determines if the information satisfies what was asked for and then sends the transaction request to the other party.
This public ledger, which is called the bitcoin protocol, is the source of all bitcoins and is the main attraction for anyone who wants to get involved in the buying and selling of digital currency. A buyer could purchase from another seller using his digital currency and then enter his transaction into the bitcoin ledger. There would be no need to worry about whether the two parties actually met, no need to fax paperwork or go through red tape. The whole process takes place without any fees or commissions.
All transactions made with the bitcoin system are recorded in the public ledger. Every transaction is public and is visible to everyone. Anyone can look at the ledger, see what was bought and sold and determine how much digital currency changed hands for each transaction. The whole process is transparent and has been compared to the way conventional currencies are valued by the government.
Unlike money sent through a bank or by a physical street vendor, every transaction with the bitcoin platform is recorded in a public ledger without fees or commissions. Since there are no fees or commissions for using this type of Cryptocurrency, the bitcoins that are exchanged are very valuable. Unlike gold or other precious metals, the price of a single bitcoin goes up and down constantly and can never be determined by a central government.
People who mine bitcoins earn themselves money. Since the supply is limited, only people with great power and resources are able to mine the virtual currency. This means that those who mine for virtual currencies are usually wealthy individuals, or groups of wealthy individuals.
To get started with the bitcoin technology, you first need to set up a wallet that functions like any other traditional online wallet. The wallets that function like a standard online wallet use your private key to make transactions and provide you with protection from unauthorized access to your private keys. On the other hand, your transactions are made with your public key, which is visible to anyone on the bitcoin network.