BitCoin Technology

By Saurabh Shakyawar, 3rd Eye Advisory Ltd

BitCoin Technology : Virtual Banking Currency

Bitcoin is an innovative internet protocol created by pseudonymous Satoshi Nakamoto that enables value to be transferred over a communications channel. Transactions are made with no middlemen so anyone can transfer money anywhere in the world without using any centralized service like a bank or PayPal.

These are also known as 'cryptocurrency'. Bitcoins are in the form of digital public money that is created by complex mathematical computations and policed by millions of computer users called 'miners'. Bitcoins are, in essence, electricity converted into long strings of code that have money value. Once you installed the Bitcoin wallet on your computer or mobile device, it will generate your first Bitcoin address and you can create more whatever you need one.

Blockchain is the shred public ledger on which the entire decentralized distributed peer-to-peer Bitcoin network relies. All confirmed transactions included in the Blockchain so that the Bitcoin wallet can calculate the spendable amount and new transactions can be verified.

Each Bitcoin Blockchain has three parts, two of which are very simple: it's identifying address (of approximately 34 characters), and the history of who has bought and sold it (the ledger). The complex part of the Bitcoin is its third part: the private key header log. This header is where a sophisticated digital signature is captured to confirm each and every transaction for that particular Bitcoin file.

A transaction is transfer of value between Bitcoin addresses that get included used to digitally sign transactions to provide a mathematical proof that they are valid. Bitcoin wallets keep a secret piece of data called the private key or seed which is used to sign transactions to provide a mathematical proof that they came from the owner of the wallet.

A digital signature prevents the transaction from being altered by anyone once it has been signed. All transactions are broadcast between users and usually begin to be validated and confirmed by the Bitcoin network within a few minutes and mostly within an hour.

The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses therefore allowing all uses to have full control over sending the Bitcoins. Thus, there is no fraud, no chargeback and no identifying information that could be compromised resulting in identity theft.

How the Bitcoin Blockchain Works ?

How Bitcoin Transaction Takes Place:

Bitcoin Abuses:

  1. Technical Glitches - Time Delay
    Bitcoins travel peer-to-peer, so it takes several seconds for a transaction to be confirmed across the miner computers. During these seconds, a dishonest person can submit a second payment of the same Bitcoins to a different recipient.
  2. Human Dishonesty - Organizers can take unfair slices
    Bitcoins mining can best achieved by the pooling (group of thousands of miner computers), the organizers of these pools can take the privileged to choose how to divide the Bitcoins that are discovered. They can take dishonestly more coins mining shares for themselves.
  3. Organization Mismanagement - Online Exchanges
    The organization running the unregulated online exchange that trade cash for Bitcoins can be fraud or incompetent i.e.; Mt. Gox. Only difference is that conventional banking losses are partially insured for the bank users, while Bitcoin exchanges have no insurance coverage for users.

  4. BitCoin - the virtual banking currency of the internet - has existed for several years now. Ultimately, though, bitcoins are highly controversial because they take the power of making money away from central federal banks, and give it to the general public. Bitcoin accounts cannot be frozen or examined by tax men, and middleman banks are completely unnecessary for bitcoins to move which is the reason why people are growing more and more eager to know about it.

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    Article by: Saurabh Shakyawar, 3rd Eye Advisory Ltd
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