Bitcoin : An introduction, how it works and how to use

In this blog,I am going to explain about bitcoin.

What is bitcoin?

Bitcoin is a digital crypto-currency , digital means it runs only on computers and there is no physical thing which can be said as bitcoin. Bitcoins are stored in encrypted form and it is a real currency. It is not a virtual thing. Bitcoins are decentralized peer-to-peer payment network , means it is not controlled by any centric authority or even by any country. It runs globally and supports peer-to-peer payment,means a computer can have transaction with another computer directly without need of any middleman.

Where can I store my bitcoins?

Bitcoins are stored in some digital form called wallet on user's computer or it may be stored online. Wallet is a file which has the information about the bitcoins in encrypted form. User can only do transactions with the help of this wallet and this wallet may be considered as money as if you lost it or file gets corrupted then it means you have lost your bitcoins.

How can I get a wallet?

There are many desktop as well as online clients which provides you the facility to get wallet like Bitcoin-Qt,Armory,Electrum,MultiBit,coinbase etc.
 
How to obtain bitcoins?

There are three ways by which you can obtain bitcoins :

1. Accept bitcoins for goods and services which you are selling
2. Buy bitcoins by some stock exchange
3. Mine bitcoins

How bitcoin works?

There is a shared block-chain ledger in which every transaction is stored and this ledger is shared among all users and fully transparent.

So let say User A want to send some bitcoins to User B then user A will broadcast a message to all users.This message contains all details of transaction like sender's name,amount,host address etc and signed by User A and then this encrypted message is broadcasted to all users.
Now User B will not receive the bitcoin until the message is verified by some users called miners.A minimum of 6 verifications are required for confirming the transactions.


How to validate the transactions and mine bitcoins?

Bitcoin mining is an interesting thing where you can obtain bitcoins by doing some work on computers. As I said that every transaction need to verified and this verification is done by minors through a process called bitcoin mining.

To validate a transaction,minors have to run a hashing algorithm on the input data provided by sender and have to produce a unique number by applying hash function. But here the output needs to meet certain restrictions and this is the thing which makes mining difficult because when we apply some hash function on an input then no one knows about the output. So to meet the restrictions miners add a nonce(a simple value like 1,2,3..) to input value and apply the hash function and check the output.They simply change the value of nonce until they get the correct value. It is a very lengthy process and normally done by a group of users.

Whenever miners get success in getting the correct hash value,they are rewarded with some bitcoins and that's the thing for which minors do the job of verification of transaction.


Where can I use my Bitcoins?

There is a growing number of businesses and individuals using Bitcoins which allow you to purchase goods and services by paying in bitcoins.You may also see option for accepting bitcoins on many shopping sites.

Thanks!!!