Bitcoin ecosystem – A quick breakdown of the
By Landry Ntahe
Bitcoin has been in existence since its creation in 2009 and has attracted investors over the years. It is a cryptocurrency and worldwide payment system. The system works without a bank or single administrator which makes bitcoin the first ever decentralised digital currency.
Bitcoin was invented by an unknown person or group of people under the name of Satoshi Nakamoto. He/they has however remained anonymous since the inception of his invention.
The system of this digital currency takes place among users or peer-to-peer, and the network nodes verify the transactions through the use of cryptography. Records are always in public distributed ledger known as the blockchain. Like a bank, it has a public key (comparable to a bank account number) in which people can send bitcoins and a private key (equivalent to an ATM pin number) which is meant to be your personal guarded secret for authorising Bitcoin transactions. The companies and individuals who own the computing power and participate in the bitcoin network are known as miners. Bitcoin mining is a process whereby bitcoins are released into circulation.
Bitcoin has changed many lives; some people believe that owing a cryptocurrency is the future and they have had life-changing experiences while some claim it is fraud. Different ideologies have been made as regards to bitcoin, but since it is becoming a successful investment, other kinds of cryptocurrencies have also sprung up.
Cryptocurrency enables you to track your bitcoin value at any time, and this could make you too expectant and unproductive if done excessively. Checking for the value constantly won’t make any change, so avoid doing it in excess. The principle of buying low and sell high applies to bitcoins.
Bitcoin wallets are where bitcoins are stored. You need a private key to secure your wallet. Wallets monitor bitcoin addresses on the blockchain and update their balance with each transaction.
HD wallets were also created, and they generate an initial phrase known as a seed or mnemonic phrase. This seed comprises of common words that can be memorised instead of a long, confusing key. If the wallet gets destroyed, you can restore by entering these words in order to reconstruct the private key.
Full nodes are when wallets hold a full copy of the blockchain for the validation of every transaction.
The most secure form of bitcoin wallets is called cold storage wallets. Cold storage is any wallet that is usually independent of any internet connection and cannot be hacked remotely. Some examples are paper wallets, brain wallets, and hardware wallets. Hot wallets are the least secure and most popular.
The worth of a bitcoin is not static and can vary or change as time goes on. It can also be exchanged for traditional currencies and can act as alternatives to national fiat money and commodities like gold.
Popular ways of accumulating the currency is through buying on a bitcoin exchanges and Bitcoin ATM’s. People purchase bitcoins for its investment values than as a medium of exchange. Bitcoin is still evolving, and you need to properly understand the unique investment risks when you want to invest.