How does the Bitcoin work?

All ecosystem of Bitcoin keeps on a blockchain. If it is difficult to speak, then the blockchain is a continuous chain of blocks of all transactions. Closing of the block happens after matching of the digital signature. After that the new block can be created. And now let’s decipher it simple words. Provide that each transfer (transaction) to Bitcoin registers in a separate page. The sequence of pages creates chapter of the book – the block.

To write down a new page (to carry out new transaction), we need “to turn” all last pages and chapters. That is, each new transaction is performed on a chain – with handling of old blocks (turning of pages and heads). New chapter of the book can be begun only after old is ended. And all heads create the book, and blocks – a blockchain. Pages and chapter can’t be pulled out or changed. And access to a blockchain is open for all participants of system.

How does the Bitcoin work?

That is, the blockchain is a big open database in which the ciphered information on all perfect transactions is stored.

Blockchain scheme

The blockchain and its potential are one of the reasons of fixed growth of a rate of bitcoin of rather fiatny currencies and key feature of BTC. Here what else there are differences between “virtual” bitcoin and regular money:

Form. Bitcoin – the electronic currency which doesn’t have material shape. There are physical “coins” with a QR code or stores in the form of coins where BTC is stored. However them it is impossible to call money literally this word. It is possible to tell that the Bitcoin is a set of the numbers generated on an algorithm. Not the paper banknote or metal coin.

Cost. The rate of fiatny currency directly depends on economic and political development of the country or confederation to which it is tied. In fact, money of more than 100 countries of the world is densely tied to dollar. The cost of bitcoin is determined by demand and directly doesn’t depend on economic processes (though it is connected indirectly).

Issue. Theoretically, regular money has no issue ceiling. They can be printed as much as necessary. In BTC there is the ceiling pledged in system – 21 000 000 coins (20 999 999, 9769). According to forecasts this figure will be reached in the middle of the 22nd century.
Direct transfers. Even if it is about electronic option of regular money (the card, a purse), then accomplishment of transactions happens to participation of the third party. In Bitcoin transaction is performed directly (P2P).

Objectively it isn’t so simple to estimate BTC. Separate features of bitcoin can be referred also to its pluses, and to its shortcomings. We will take such characteristic as irreversibility of transactions. On the one hand, you receive cryptocurrency anyway – no system failure will block transaction. With another – it line of Bitcoin is operated by swindlers or representatives of the “black” market.

It is possible to carry to the main pluses:

  • Anonymity – other participant of transaction will know only your Bitcoin-address or a QR code. Other data aren’t disclosed.
  • The decentralized nature of system – all participants of network are equal also independent.
  • Safety – breaking of purses, substitution of data, interception of the translations are impossible.
  • The globality – bitcoin allows to carry out quickly transactions between people from the different countries, time zones.
  • The Mining – exists the independent method of production of BTC considered by many as earnings.

Often carry the speed of transactions to pluses of Bitcoin. Everything is far not so simple. Transaction can last and 10-20 minutes, and sometimes and hour. Its completion requires 6 confirmations of other participants. They occur automatically. In case of high loading of network the translations are slowed down. One more minus – regulatory activities of the authorities of the different countries in relation to cryptocurrencies. Formally BTC creates identical conditions for all potential participants of network. However in the certain countries (Vietnam, India, Ecuador, partially China) prohibitions are issued.

Other minuses:

  • The unstable rate – because of it the capacity of BTC as payment option decreases;
  • Fraud – Bitcoin is very reliable. However inexperienced people can come across schemes of a divorce: fake exchangers, fraudulent investment projects, viruses.