Bitcoin is a digital currency that is created and distributed with the help of public distributed ledger known as blockchain. All the digital currencies follow the blockchain technology where each transaction is recorded as a block. And when successive blocks are made one after the other, a chain of sorts is formed – known as blockchain. Since it’s recorded on a distributed ledger, the transactions are quite transparent and secure.
Bitcoin, the largest cryptocurrency in the world, was created by Satoshi Nakamoto in 2009. Following the success of bitcoin, a range of digital currencies (also known as cryptocurrencies) were launched such as Ethereum, Cardano, XRP and Polkadot. The balance of bitcoins is kept in a wallet using public and private keys — which is a long string of numbers linked through the mathematical encryption algorithm used to create them.
Bitcoin uses peer-to-peer technology to ensure instant payments. It is different from fiat currency in a way that the latter is regulated by a central bank — such as Indian rupee by the Reserve Bank of India — while bitcoin is not.
Though bitcoin is priced lower these days as it hovers in the range of $18,500 to $19,400, but one can also buy in smaller units. One bitcoin can be divided into 100 millionth of one coin and the smallest unit is known as ‘Satoshi’ named after its creator.
Mining of bitcoins
The process of creating new bitcoins is known as mining, which also plays a vital role in maintaining the blockchain ledger. The mining is done on computers that can solve complex mathematical problems.
There will be a total of 21 million bitcoins that will be released in total. As of now, over 18 million bitcoins have been released, leaving less than 3 million more to be mined in future. This is believed to be one of the key reasons for the ever-increasing price of bitcoin. With demand on an upswing, and supply declining — the price of product (currency in this case) is likely to soar higher.
With bitcoin becoming popular - though not legally accepted tender in most places as yet – some businesses and merchants have started accepting payments in bitcoins such as PayPal, Zynga and Starbucks. As a matter of fact, El Salvador became the first country to adopt bitcoin as legal tender in June 2021.
Though bitcoin is used synonymously with digital currency, it is – in fact – one among several cryptocurrencies. But being the first one and undoubtedly the most popular one, it has become a rage in the investment and trading circles.