What is the Bitcoin, what is bitcoin mining, how bitcoin works I am going to explain you in simple language in hindi.
Bitcoin was created by the “Satoshi Nakamoto“. Bitcoin is a form of digital currency, created and stored electronically. No institution or country controls the bitcoin(decentralised currency). Bitcoins are not printed like normal currency for example dollars, euro, pounds, Indian rupee etc.
Bitcoin is produced digitally by people by solving complex mathematical problems. It’s a type of cryptocurrency. Or we can call as mining by using computing power.
What is Cryptocurrency
A form of currency based on mathematics alone. Instead of fiat currency, which is printed, cryptocurrency is produced by solving mathematical problems based on cryptography.
This can be used to purchase goods and services, the bitcoins can be purchased online and can be sell online.
You cannot make unlimited bitcoins as the protocol or coding associated with it does not do so, the coding or algorithm derived was in such a way that only 21 Million bitcoins will be produced in the world.
However the bitcoin can be divided into smaller parts (the smallest divisible amount is one hundred million of a single bitcoin and is called satoshi named on founder).
When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.
Bitcoin transactions are sent from and to electronic bitcoin wallets, and are digitally signed for security. There are no bitcoins, only records of bitcoin transactions.
To send bitcoins, you need two things: a bitcoin address and a private key. A bitcoin address is generated randomly, and is simply a sequence of letters and numbers. The private key is another sequence of letters and numbers, but unlike your bitcoin address, this is kept secret.
How does Bitcoin Mining Works
Lots of people send bitcoins over the internet all the time. It’s very difficult to track the transactions like who sent to whom, so the bitcoin network takes a list of all transactions for a particular period of time and list them in a block. Now it’s a miners job to confirm those transactions and write them into general ledger.
Bitcoin stores details of every single transaction that ever happened in the network in a huge version of a general ledger, called the blockchain.
This general ledger is a long list of blocks and is called a blockchain. A constantly updated copy of block is given to everybody who joins the bitcoin network so that everybody knows what is going on. However some ledger need to be trusted. Here miner role comes.
When a block of transactions is created, miners put it through a process. They take the information in the block, and apply a mathematical formula to it, turning it into something else. That something else is a far shorter, seemingly random sequence of letters and numbers known as a hash. This hash is stored along with the block, at the end of the blockchain at that point in time.
How miners make Bitcoins
All miners compete among themselves to create a Hash by a code specifically written to mine blocks. Every time someone successfully creates a hash 25 bitcoins are given as reward and blockchain is updated. This is the incentive to mine and keep transactions working.
Creating hash is easy but bitcoin network makes it more difficult over the time as part of the algorithm used. Bitcoin protocol does not accept old hash, its demands the hash to look some different way having some zeroes in starting etc.
Miners use a random piece of data(called nonce) to create hash\blocks they don’t mess with other people data. Nonce used with the transaction data to create a hash.If the hash doesn’t fit the required format, the nonce is changed, and the whole thing is hashed again. It can take many attempts to find a nonce that works, and all the miners in the network are trying to do it at the same time. That’s how miners earn their bitcoins.
How to Buy\Sell Bitcoins
Today in many countries we have bitcoin exchanges where you can online buy and sell bitcoin easily.
Bitcoin wallets are used to store bitcoins.
An Application Specific Integrated Circuit is a silicon chip specifically designed to do a single task. In the case of bitcoin, they are designed to process SHA-256 hashing problems to mine new bitcoins.
A bitcoin ATM is a physical machine that allows a customer to buy bitcoin with cash.
A mathematical process that takes a variable amount of data and produces a shorter, fixed-length output. A hashing function has two important characteristics.
- It is mathematically difficult to work out what the original input was by looking at the output.
- Changing even the tiniest part of the input will produce an entirely different output.
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