Bitcoins!!! what that means? Is it a coin? Or Is it a data unit? (bits or bytes). Many peoples got confused in this term when they heard for first time and it is natural due to its confusing name. But what does it really mean????...... Lets explore about it.
First of all lets define the term bitcoin.
"A Bitcoin is a cryptocurrency (digital currency) or digital payment system used worldwide without an administrator".
It may be invented by an unknown person or a group of people under the name satoshi nakamoto and released as an open scource software in the 3 january 2009.
It enables a peer to peer connection between the hosts (or there is a direct transaction between the hosts without an intermediary). This proves that it is a De-Centralized currency system. The transcations are verified by the network nodes and recorded in a public distribution ledger called a blockchain.
So as it is clear from above that it is a digital currency used worldwide.
Units of bitcoins
Well every system have some measurements which are measure in units.
The units of bitcoins is BTC or xBT. The small amounts of bitcoins uses an alternative unit called millibitcoin (mBTC).
A satoshi is the smallest amount of bitcoin which is equal to 0.00000001 or one hundred millionths of a bitcoin and a millibitcoin is equals to 0.001 botcoin or one thousandth of a bitcoin.
Transactions and transaction fee
"Transactions consists of one or more inputs and outputs and defined using a Forth - like scripting language".
When user sends bitcoin(input) he/she generates an address and the amount of bitcoin sends to that address(output). To prevent double spending,each input must refer to the previous unspent output in the block chain. Since transactions have multiple outputs one can send bitcoins to multiple addresses at once. When the sum of inputs is greater than the intended sum of payments, an additional output is used, returning the change back to payer.
"Any input satoshi not accounted for in the transaction output becomes the transaction fee".
It is optional and based on the storage size of the transaction generated, which in turn depends upon the number of inputs used to create the transactions.
Bitcoin mining and wallets
First of all lets define the term bitcoin.
"A Bitcoin is a cryptocurrency (digital currency) or digital payment system used worldwide without an administrator".
It may be invented by an unknown person or a group of people under the name satoshi nakamoto and released as an open scource software in the 3 january 2009.
It enables a peer to peer connection between the hosts (or there is a direct transaction between the hosts without an intermediary). This proves that it is a De-Centralized currency system. The transcations are verified by the network nodes and recorded in a public distribution ledger called a blockchain.
So as it is clear from above that it is a digital currency used worldwide.
Units of bitcoins
Well every system have some measurements which are measure in units.
The units of bitcoins is BTC or xBT. The small amounts of bitcoins uses an alternative unit called millibitcoin (mBTC).
A satoshi is the smallest amount of bitcoin which is equal to 0.00000001 or one hundred millionths of a bitcoin and a millibitcoin is equals to 0.001 botcoin or one thousandth of a bitcoin.
Transactions and transaction fee
"Transactions consists of one or more inputs and outputs and defined using a Forth - like scripting language".
When user sends bitcoin(input) he/she generates an address and the amount of bitcoin sends to that address(output). To prevent double spending,each input must refer to the previous unspent output in the block chain. Since transactions have multiple outputs one can send bitcoins to multiple addresses at once. When the sum of inputs is greater than the intended sum of payments, an additional output is used, returning the change back to payer.
"Any input satoshi not accounted for in the transaction output becomes the transaction fee".
It is optional and based on the storage size of the transaction generated, which in turn depends upon the number of inputs used to create the transactions.
Bitcoin mining and wallets
"Bitcoin minning is nothing but generally process of keeping the records services done through the use of computer processing power"
The bitcoin minners keep the blockchain constient, complete and unalterableby repeatedly verifying and collecting newly broadcast transactions into a new group of transcations called a block.
each block have a cryptographic hash of previous block using SHA-256 hashing algorithm which links the blockchain its name.
Bitcoin wallet
"A bitcoin wallet stores the information necessary to transists the bitcoins".
since bitcoin uses public key cryptography, in which two cryptographic key is generated (one is public and one is private) so generally we can say that a wallet is a collection of these two keys.
Types of bitcoin wallet
There are several types of bitcoin wallets :-
1. Software wallet: These types of wallets allow the sharing of bitcoins and holding them after connected to the network. These are of two types :-
Full clients : These verify transactions directly on a local copy of block chain (over 136 GB as of Oct 2017) , or a sunset of the blockchain (2 GB). Due to the size and complexity, the entire blockchain is not suitable for all computing devices.
Lightweight clients: These can be used to send and receive transaction without the need of local copy of the entire blockchain. Thi's makes them much faster to setup and allow them to use on low power, low bandwidth devices like smartphones. But do note that when using a lightweight wallet the user have to trust the server at certain degree because the server can't steal the bitcoins but it can report faulty values back to the user. So in both types of wallets the user's are responsible for keeping their private keys in a secure place.
2. Online wallet: They offer similar functionalities as software wallet but to access funds the credentials are stored with the online wallet service provider rather than the user's hardware. The user must trust on their service providers because any security breach or malicious service provider may lead to entrusted bitcoins to be stolen.
3. Physical walwallet: They store credentials that are necessary to spend bitcoins offline. For example, a novelty coin with credentials printed on metal, paper printouts, etc.
4. Hardwatere wallet: They store credentials offline while facilitating the transactions.
So guys I hope that you have been satisfied with these informations about the bitcoins provided here.
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