When it comes to Bitcoin, the chances are good that you have heard of it, but do you fully understand how it works? Don’t worry if you do not; it is a difficult concept to grasp.
Basically, the Bitcoin network is made up of thousands of computers around the globe. Anyone who chooses to download the Bitcoin software becomes part of the network. Essentially, when you download the software, you are lending the network some of your computing power.
This is what makes the Bitcoin network as strong as hundreds supercomputers. The computers within the network bear the costs in terms of energy and processing power.
And herein lies one of the primary advantages of the underlying tech. To build and maintain a similar network would be prohibitively expensive for a single person or organization. By spreading it out, costs are shared.
A secondary advantage is that downtime is pretty much eliminated. It is unlikely that all the computers within the network would be down at the same time. And, even if three quarters of them were, the system would still function.
But, what does this system do, exactly? Why is the network in place? In the case of Bitcoin, the idea was simple. It is a basic payments system. But it is unlike any system that came before. You do not need a bank account to operate it – all the information is stored right there.
So, if you feel like trying your luck at a Bitcoin casino, you don’t need to use a credit or debit card. All you would do is to open an account and transfer money into it.
There would be no waiting for the bank to transfer the funds, as this would be automatically done as soon as your transaction has been verified online. This should take around ten minutes or so.
And that brings us to the next big Bitcoin benefit. The transfer of funds from one person to another is just about immediate. It doesn’t go through banks, clearing houses, etc. It is just a straightforward transfer.
Okay, now, for the uninitiated, that may seem a little risky. After all, who checks that the people sending the transactions through are actually authorized to do so? That brings us to the next big benefit of Bitcoin.
Each transaction must be signed by the account holder and then submitted for verification. These transactions are added to a block of information. Each block of information contains information from the preceding one and also time stamped.
They cannot be deleted, and everyone on the network can see the details of the transaction. To add to this, each block is heavily encrypted and cannot be added unless a very complex problem is solved.
Once the problem has been solved, the solution is checked and verified across many computers within the network. If they agree that the solution is the best, the information in the block is added to the blockchain which is a distributed ledger.
This, in addition to the permanency of the information, is what makes it highly secure. Want to find out more about Bitcoin? Check out the infographic below.
Listen to the Bigtime Benefits of Bitcoin: