When I go to work and listen people talking about Bitcoin , I usually end up asking , what is it , or do u know how it works , and I most of the times I get these answers
It awesome man, I got 20% return
Its crypto currency and u can send it to anyone
It is fake, it has no real value
These answers gave me great chance to actually find out , what exactly is it and how it works, I will try to keep it as simple as I can and make u understand the math behind it
Bitcoin is cryptocurrency which is not governed by any organization, which means it is decentralized, Unlike USD, INR which are controlled by the government (Centralized). It works on cryptography codes which makes it secure. Bitcoin are created through the process of mining, which involves competing to find solutions to a mathematical problem while processing bitcoin transactions (sending Bitcoin from one person to another person) , any participant in the bitcoin network may operate as a miner ( who solve complex mathematical problems) . As anyone can be miner it solves the problem of central issuing authority like central bank
Let’s start with an example
Let’s say Joe transfer 0.10 BTC to Alice for some cash, now Alice have .10 BTC in her BTC wallet
Now Alice wants to buy a cup of coffee from Bob’s café, At Bob’s shop the point of sale system will convert the price of the coffee in USD to BTC and show both the prices on the screen
Total
$1.50 USD
0.015 BTC
Point of sale system will show a special QR code with the payment details for the payment of the coffee
QR code will consist: Destination address, Payment amount, Generic description: Bob’s café
Destination address will be like: 1cDid9kfaatwczbwbttqcwpv7hk
Payment amount: 0.015 BTC
Once Alice uses her smartphone to Scan the QR code ,details of 0.015 BTC to Bob’s café will be displayed , once she authorize the transaction the BTC will be sent to BOB’s address defined in the QR code
Miner the person who verify this transaction will be rewarded as new Bitcoin. By this process new bitcoins are generated. It is pretty easy how one can use bitcoin to transact to send and receive money , However the person who solve the mathematical problem to verify each transaction does most of the job which makes this whole thing secure and trustful .
There is a lot more to understand, what Miner does and how he solves the mathematical problem? . How the system proves the ownership of the BTC, what is the transaction chain ? etc.
I will cover few more concepts in my next blog to make u understand how Mining works
This new technology can solve real time problems of trust and corruption.
Take care !!
Source : Mastering Bitcoin by Andreas M.Antonopoulos
