What is bitcoin and how does bitcoin work - firstsitereview
Today we are discussing what bitcoin is and how does bitcoin work.
Bitcoin as its core is a hardware protocol software based on Blockchain. The digital token has a value, what others are willing to pay for it is simply supply and demand. In the Beginning, Bitcoin came out with $0.0008 Cents as many people bought bitcoin tokens now the bitcoin price reached $50k.
How does bitcoin work
Bitcoin is a digital currency based on a relay system, Each transaction as a ledger is also known as the blockchain. That may sound confusing but that means bitcoin isn’t run in some basement on the other side of the world. Rather it runs on thousands of computers across the world simultaneously without one centralized controller.
Well, many people just buy bitcoin through coin base or another pass-through, the digital tokens actually created by bitcoin miners which use high-power computers to solve complex maths problems. They confirm the transactions on a decentralized blockchain to keep buying and selling bitcoin smoothly.
After a block transaction is confirmed by miners the miners get rewarded with a smaller amount of bitcoin. Bitcoin mining is ultimately under pending of how does bitcoin works? Miners land their computer power on the blockchain to get rewarded from digital currency.
On January 3, 2009, Satoshi Nakamoto mined the first block called genesis block it is rewarded with 50 Bitcoins that brought bitcoin to existence.
Let’s Learn More about Blockchain
Blockchain isn’t bitcoin as much, Bitcoin isn’t blockchain. Blockchain is a software protocol that is used in many exciting applications, to the normal listener like many manufacturing, software companies, Banking, and other applications. The first blockchain was discovered by Satoshi Nakamoto in 2008 the creator of bitcoin.
Initially, the two-term words were always used together but blockchain diverse even bigger software technology phenomena. Blockchains are simply in theory a digital chain of blocks each block being a group of information it's nothing but like folders.
The blocks are ordered chronologically; they cannot be unordered; it's like a timeline digital advance independently verified securely decentralized network. This is a secured software protocol that stands the basis of bitcoin by having secured transactions in the blockchain, bitcoin tokens are transferred from person to person securely tracked through blockchain. All decentralized mining computers all over the world.
Because blockchains are distributed ledgers the entire bitcoin blockchain is public by making such complex information public can ensure no changes are made over time because other people would see the change being made or see their blockchain they can see the difference between one and the other person is providing.
Miners work together to validate them, Bitcoin users generally have wallets addresses that can be like strings, numbers, letters, they can be identified in the blockchain in order to serve the sending and receiving for digital currency.
What makes bitcoin worth?
Well, that neither can ever be more than 21M in existence this creates a finite supply. The only way the new bitcoin is made is through mining, as a reward to miners for validating transactions. The amount of bitcoin the miner get for processing a bock slowly decreases overtime the process is known as Having,
The Reward for mining is cut-in-half for every 210,000 blocks mined. This process is set to continue until 2140 when all of the bitcoin 21M are Mined after this miners will get paid fees based on the structure to continue processing transactions on the blockchain.
This also means that mining also gets less profitable over time the rewards decrease. However, that's only if the price stays the same, if the price per bitcoin goes up, If it goes faster than the rewards decrease mining gets more profit which sometimes happens
The limited supply of bitcoin also means there is a supply and demand issue as we mentioned.
If more people wanted to buy bitcoins due to there being limited supply the price needed to go up that's why we have seen such a metric rise in bitcoins price.
If the lowest owner of the bitcoin doesn’t want to sell for anything less than fifty thousand dollars then bitcoin would be valued at fifty thousand dollars because that's the lowest you could buy it for that's oversimplified for supply and demand but essentially bitcoin worth what people are willing to pay for it. It doesn't have any intrinsic value all of these serve as a very basic overview to bitcoin and blockchains though we haven’t gone into hashed data different risks in the bitcoin network something called 51% attack or in the cryptography insecurity that goes in blockchain and blockchain wallets completely secure.
However to the casual or beginning bitcoin owner or buyer that info can sometimes overwhelm and infuse and warrants its own individual research.
In summary
Bitcoin is a digital token valuated a secured decentralized software network that runs computers all around the world known as miners, these miners ensure people can buy and sell bitcoin securely and the miners get rewarded a small amount of new bitcoin there can be over 21 Million in existence and due to that limited supply as more people want to buy bitcoin the price goes up and up until more people are willing to sell it as a given price supply and demand.
No one knows what happened to bitcoin or its price. But one thing is for sure fortunes have been made and lost on the cryptocurrency but it’s likely here to stay.
But of course, when you make a fortune the IRS wants a piece of it. If you’ve bought bitcoin or any cryptocurrency you’re going to need to file income TAX on your earnings or risk being audited by the IRS in the US.
One of the simplest ways to do that is by using legible TAX software solutions allows you to quickly create TAX documents for your cryptocurrency activities for the TAX year and analyze your gains and portfolio value throughout the year.
Be able to maximize your TAX saving at year END by making smart informed moves.
You can learn a secure system and use it to file taxes by visiting their website.
So, we have discussed