So let’s say you are in a shop, and you notice that a particular customer paid by scanning his mobile phone and voila! All items have been successfully purchased. And you are left there wondering, with your credit card or cash in hand, what in the world just happened?
Apparently, another way of paying your transaction has been discovered, with more convenience compared to using cash or even credit cards. This mode is called Bitcoin, invented by Satoshi Nakamoto year 2009. This new online payment system can be used to complete transactions directly without a third party or banks. Merchants or business owners who useBitcoin for their sale transactions have grown significantly since its release. All transactions made using Bitcoin are recorded and archived in a public distributed ledger, commonly called “block chain”. Though all transactions are documented, the identity of the transaction owners remains anonymous. This is the reason thatBitcoin is also deemed as the first cryptocurrency, as it is also the largest of its kind for its current total market value.
There are several terms associated with Bitcoin use. These include:
- Block Chain
Block chain, commonly called as public ledger, is used to record every bitcoin transactions. Maintenance of this ledger is performed by a network of communicating “nodes” on the bitcoin database. The nodes can validate transactions, add them on the ledger and connect them with the other transactions on the ledger. In order to identify an ownership for every bitcoin, every node will store a copy of the chain. In an hour’s time, the ledger is updated approximately six times and a new block is added.
This is not your usual wallet. In the bitcoin world, the term wallet may mean a few things. Basically, it acts as storage for all the necessary information to transact bitcoins. There are several types of wallets designed to cater to the customer’s needs. Hardware wallets can be used in keeping your credentials offline even during transactions. Online wallets are applications that may be kept on your mobile phone, and used for any bitcoin transaction. This is highly preferred as it is also very convenient to use. There is also what is called a Physical wallet, which may also be used offline. Your credentials will be printed on plastic or a simple printout.
Mining is a service mainly used for record keeping. Remember the ledger or “block chain”? Miners act as security guards, making sure that the block chain remains without changes or alteration. They also collect new information of transactions called “block”.
Bitcoins are expressed or represented by units such as BTC or XBT.
Ownership simply means that a bitcoin is associated with a specific address. Digital signs are required from the payer using a corresponding private key. Once the private key is lost, no other user will be able to use the bitcoin. In one instance, a user reported that he has lost 7,500 bitcoin in the year 2013, which is worth $7.5 million dollars at the time.