Before moving ahead, for all my Japanese friends, here is the youtube video for better understanding.
Year 2013. It really came as a surprise to the open-source community in general. A mysterious developer from God-knows-where, creates a digital currency, a protocol to enable its transmission and software to support it that storms the internet and the real economic world. Satoshi Nakamoto, his pseudonym, suggests that he’s a Japanese. But people who like to dig deep imply his British origin from his style of writing. Mysterious, indeed. But his creation may be the long-awaited revolution of the world economy after the dot-com bubble burst.
Bitcoin is advertised as a peer-to-peer version of electronic cash. It allows online payments to be sent directly from one party to another without going through an intermediary financial institution, such as a bank gateway. A Bitcoin transaction is almost like e-mail. The payee has a Bitcoin wallet, which is a software installed on her computer or phone. The wallet has Bitcoin address, which she discloses to the payer. The payer can then transfer Bitcoins to the payee’s Bitcoin wallet. The advantages of Bitcoin are numerous. The transaction is secured by military-grade cryptographic algorithms. So, nobody can fake a transaction or steal your money without having a copy of the your wallet. The transactions are blazingly fast, as there are no banks or intermediaries to slow them down. Bitcoins are absolutely free to send and receive. And they allow anonymous transactions to be made. Pretty neat, huh?
All this seems magically, notoriously perfect. But the good news is, Satoshi Nakamoto, whoever he may be, has been able to create a nearly perfect currency that goes with the spirit of a free and open web. How does it all work? Let’s look at some technicalities.
The user chooses a wallet from many Bitcoin wallets available. A wallet is essentially a software for your computer or phone. At the heart of the entire Bitcoin network sits the blockchain, which is a shared public transaction log. The blockchain contains all confirmed Bitcoin transactions. A transaction of Bitcoins is a transfer of value between Bitcoin addresses. To make the transactions secure and authentic, each Bitcoin wallet uses private keys for each Bitcoin address. Once a transaction has been made between two users, it is confirmed by the Bitcoin network through a process called mining. During mining, each successful transaction is included in the blockchain by a distributed consensus. So, many computers on the network have to agree on the state of the system to approve a transaction. This way, no individual or organisation can affect a transaction.
Bitcoin decentralizes the authority of economic transactions on the internet. People have showed distrust in our existing financial organisations for long. Bitcoin seems to solve the problem by taking the banks out of the equation. By using Bitcoin as an individual, an organization or a developer, you will contribute to the rise of a truly free and open web, where transparency and equality are the buzz words.
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