"Progress is impossible without change, and those who cannot change their minds cannot change anything"
-George Barnard Shaw
Millions of years ago, humans inhabited Earth, ever since then nothing on earth has remained the same or constant. The little inquisitive minds of humans are always eager to get hold of something new and unique every time. The financial sector has often faced its consequences by constantly changing. From Barter systems to paper currency, from piggy banks to stock exchanges, the financial sector is always buzzed with newer modes of dealings, and one of its most popular changes is- Introduction of Bitcoins into the world of finance. Isn't it just another form of currency? So what is with all the frenzy behind it?
Bitcoin is the world’s first decentralized cryptocurrency. It is a type of digital asset that uses public-key cryptography to record, sign and send transactions over the Bitcoin blockchain. It is a digital currency without a single administrator and can be sent user to user through a peer-to-peer bitcoin network without the need for any intermediaries.
Bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, known as a blockchain. The bitcoin blockchain is a public ledger that records transactions. In bitcoin, there is no central storage and thus the ledger is public i.e anybody can store it on their computer. Thus ledger is maintained by a network of equally privileged miners. The application of this idea implies a payment system wherein all transactions happen directly between the owner and the receiver and is broadcast through a P2P network.
Bitcoins were launched in 2009 by an anonymous computer programmer under Satoshi Nakamoto. The identity of the person or the group who created this technology is still unknown and is a mystery to the world.
Bitcoins are registered to bitcoin addresses in the blockchain. A bitcoin address is a unique identifier that serves as a virtual location where the cryptocurrency can be sent. Balances of bitcoin are kept through public and private keys. Public keys serve as the address published to the world and to which others may send bitcoin whereas the private key is meant to be only used to authorize bitcoin transmission. If by chance the private key is lost, then the bitcoin network will not recognize any other evidence of ownership, therefore the coins are lost. Also if the private key is revealed to any third person thus through a data breach third person can steal the bitcoins of the original owner.
Bitcoins are pseudonymous, which means that funds are not tied with real-world entities but rather bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public. In reality, there are no physical bitcoins, only balances kept on a public ledger that everyone has transparent access to. They are not issued or backed by any government or banks. Despite not being legal tender in most parts of the world it has great influence and has become popular these days.