ManoBTC

There are three elements of how bitcoin works. The first is the mining of the currency or cryptocurrency, as it is known. The second is using bitcoins and the third is exchanging bitcoins for real currencies that are regulated by central authorities. Let us first explore how bitcoin works pertaining to its creation.

Satoshi Nakamoto is credited with the creation of bitcoin but it is believed that the name is merely a pseudonym and that it could be many people having used that same pseudonym had created bitcoin. Regardless, bitcoin is based on a mathematical formula and it uses cryptography to be created and regulated. There’s a bitcoin protocol that says up to twenty one million bitcoins can be created or mined. The further one goes in the mining process, the harder is the process. The mining process is quite complicated. One needs appropriate software and has to indulge in number crunching and complicated mathematical problems to generate or create new bitcoin. Once the problems are solved or the accomplishments of the miners get approved and added to the log, a few bitcoins are allotted to their account. Presently, one gets twenty five bitcoins. Only the miners can create new bitcoins and others have to earn them or get them through circulation. Anyone can be a miner as the cryptocurrency is entirely digital and is based on a peer to peer network. The peer to peer network can include anyone with a computer and access to the internet. Now, how bitcoins works as payment systems or a currency.

Bitcoins can be used for payments just as you would use dollar, euro, pound or any other traditional currency. You could come across a digital camera priced at four hundred dollars or ten bitcoins. You can choose to make the payment in bitcoins or in dollars. Whoever and wherever you can pay with bitcoins, you can use the cryptocurrency to make the payments and you can get your purchased items or services. Bitcoins are being increasingly accepted by ecommerce stores but more widely by gaming and gambling sites, peer to peer networks and other systems where regulation of a particular currency is not of quintessence. You could also hold your bitcoins in your digital wallet.

How bitcoin works in the real world?

Bitcoin can be exchanged for dollars or any other currency on websites that offer such a facility. Bitcoin has been valued as $20, as high as $250 and then has again been valued at $150. The valuation at a particular point in time, or the exchange rate, will determine how much dollar money you would get in exchange of your bitcoins.