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Apparently the best known digital currency, Bitcoin came into existence early in the year 2009. Created by a group of programmers or a single handed programmer known as Satoshi Nakamoto, there have been speculations and various claims as to know who was the initiator of the project but the search has been in vain.
Being made to ease the transactions between two parties anywhere in the world without the necessity of adding a judge to guarantee the transaction, Bitcoin, today serves millions of satisfied customers. Though a little complicated to understand in terms of technology, let’s understand it today in an easy way.
So what is Bitcoin in a layman’s language?
So let’s simply start that you and me are sitting at a café and suddenly you like my pen and tell me about it that it’s your desire to possess such a pen. I don’t require that pen anymore and offer you to accept the same. You being very happy about the idea and express your opinion to match mine. I take out the pen from my pocket and give it you. Now I have no pen but you have one pen.
Hmm… So very basic till now?
But wait, here is the catch. We did not have any arbitrator to acknowledge the fact that I gave you my pen. You know we exchanged, I know we exchanged but no third person to confirm our transaction (though till now I haven’t asked/received something in exchange). You now can give the pen to your parents, wife, friends, etc. They further can give it to someone else and the transaction shall go on.
Now understand – The pen has completely left my possession and now it can be anybody’s. I have no authority left to decide whether a particular person can possess the same or no. The entire story can be about an apple, banana, handkerchief, or anything.
But now here is the catch. What if that was a digital pen? Yeah! Now seems interesting right. Now how and who can guarantee that the digital pen used to be mine and is only mine and when I gave you, it’s yours?
Seems complicated now?
Maybe I have a couple of copies of the same digital pen in my computer? Maybe the person from whom I bought has same copies. Maybe he might have uploaded it on the internet and millions of people might have downloaded it.
So maybe what you got might not be completely yours. It’s just a copy?
So we understand that the digital exchange of anything is a bit complicated. Giving physical possession of something is not as same as giving digital possession of something.
Now here some technology expert woke up and build in something very interesting which can solve this problem of ours and yes, even here you would not need an arbitrator in between. He gave the name to this problem as Double Spending Problem.
Now someone suggested that we should treat the transaction of the pen in a ledger. Simply like how we track transactions in an accounting book. Now since the ledger shall be a digital ledger so someone needs to take care of it and ethically maintain all the transactions in the same.
Now the problem again might arise if someone in the world creates a similar ledger or couple of such ledgers or add many pens in the original ledger account and might create many similar transactions. Then the technology expert thought of giving the control of the ledger to everyone. Like everyone shall have the control of the account and every transaction shall be recorded by the one who is transacting and once the digital pen is transferred from him, he cannot enter the transaction because he doesn’t possess the same anymore. The next person can only have the right to enter the transaction because he has the digital pen and he can only fill in the next transaction.
This way, nobody will cheat and if the transactions are many, it will be nearly impossible for someone to cheat as he might not be aware as to who possesses the digital pen next. Plus when the transaction is not controlled by a single person, that person cannot decide on his own to give himself many digital pen. It shall be nearly impossible for him to cheat on this system.
Plus there exist smart codes and rules which are open source which will be maintained by smart people who have dept knowledge about the technology used and they shall maintain, secure, check and improve the way of operating the system.
Anyone can participate in the transaction to update the ledger and make sure that you check out. For taking this trouble, you could even be rewarded. They give 25 digital pens as rewards which is the easiest way to earn in the system.
So, now as we have simplified a lot, let’s get the technical terms in.
System explained – Bitcoin Protocol
Digital Pens – Bitcoin
So being an open source and everyone knows how many bitcoins are available as they are scarce. The bitcoin will certifiably leave the person’s possession who gives it to someone else and he won’t ever be able to regain it fraudulently. Though the seller of the bitcoin shall have full knowledge about its existence with other people through the open ledger and shall be updated with every transaction. Being a public ledger, the seller cannot cheat by possessing extra coins. So within the system, the exchange of digital shall be same as we exchange the physical pen.
Also what’s cool is here we can deal with 1 coin, 2 coins, 100 coins, 1 billion coins, 0.1 coin or even 0.00000001 coin as the system market is digital. By a click of a button, the same can be sold, purchased and checked. As the market being digital, one can do a lot with it like attaching a note with the specific bitcoin or being more specific by attaching a stock market certificate, ID card, contract and much more. This can happen when one person is on one side of the earth and the other on the opposite side also.
Some say this system won’t work, some argue over it, some name it as digital gold and some say it’s a currency. But in my opinion it’s a great system invented and has a lot dept within it and shall have more to learn.
Hope you like this post and if you have some interesting information for user then please let us know in comment so we can add and make this post more better.
Thanks for reading!!