Tags: Bitcoin, Investing, Technical, Transactions

Bitcoin 101: Technical Aspects of Transactions

31 Aug, 2020

 bitcoin, investing, technical, bitcoin transactions

 

 

Due to its high returns, Bitcoin remains the leading cryptocurrency. But from a technical standpoint investing your profits in other cryptocurrency areas can be intimidating with mining, halving, keys and wallets. Here we will review bitcoin from a technical standpoint to help you feel more confident in your decisions.

 

The inception of Bitcoin triggers an unending debate amongst experts. Some experts are of the view it is a currency just like our own traditional fiat currency. On the flip side, some experts perceive it as a store of value.

 

Despite the massive detail unveiled about the Bitcoin, skepticism persists but it's diminishing as places like Wyoming are declaring themselves blockchain hubs.

 

Technically speaking, Bitcoin can be construed as software. Bitcoin is visually advertised as the stock image of shiny coins along with modified Thai baht symbols. 

 

Before the advent of Bitcoin, many financial and technical experts were pursuing their efforts to create a virtual currency unleashing the potential of cryptography.

 

As Bitcoin managed to gain substantial industry acclaim, many scammers tried to imitate it. Despite their mall intentions Bitcoin still remains the leading cryptocurrency in terms of investing and market capitalization. 

 

What sets Bitcoin apart from other cryptocurrencies is its underlying technology and decade-old history. To make an informed decision guided by expert financial advisors Boracchia Wiviott Wealth partners about investing in cryptocurrency click here.  

 

Blockchain

 

An underlying Blockchain protocol empowers Bitcoin. Bitcoin was originally put forth by an anonymous person Satoshi Nakamoto, but until now no one is completely aware of Santosh's real identity.

 

Since then, Bitcoin has managed to grab substantial market traction and numerous Blockchain networks have been created and deployed in different fields leveraging the power of cryptographic hash function algorithms. Blockchain is very closely related to Bitcoin besides, it is the underlying technology behind all the cryptocurrencies particularly Ethereum.

 

Bitcoin was designed to be used as a store of value and a payment processing system.

Some crypto enthusiasts strongly believe that Bitcoin has the ability to replace our traditional fiat currency and can be incorporated as a default payment option but the consensus still has to be reached. 

 

The versatility of Blockchain technology has grabbed the attention of many technology aficionados, government, and large enterprises. Many experts think technology lays down the foundation of the new era of fintech to make the world less reliant on third-party intermediaries or governing bodies.

 

Blockchain technology and distributive ledgers are often used interchangeably. Bitcoin’s Blockchain is distributed therefore it is publicly available to all the participants of the network. There is no governing body responsible for validating Bitcoin transactions, so the participants of the Bitcoin network do the job of verifying each block of transaction.

Blockchain Technical Aspects

 

The working methodology of Blockchain is pretty much simple and straightforward. A Blockchain is a chain of blocks wherein each subsequent block is linked to the preceding blocks by a cryptographic hash value.

 

Strings of 0s and 1s are what comprise the information stored in the Blockchain therefore, we can store emails, contracts, land titles, marriage certificates, and plenty of other things in the Blockchain network. 

 

Technically speaking, any contract between two peers can be easily stored in the Blockchain database as long as both parties express their satisfaction over the contract. Thereby, Blockchain eliminates the need for any intermediary in the contract.

 

In a Blockchain-driven cryptocurrency Bitcoin, the information stored in it is mostly related to the transactions. 

 

To keep that in perspective, let’s take a technical example, let’s suppose Bob sends X Bitcoins to an Alice, and Alice sends Y Bitcoin to Akash.  By combining all these transactions, anyone can get the complete detail of all the transactions. It is pertinent to know that it is not mandatory that both the sender and a recipient are human.

 

To keep that in perspective, let’s suppose 15N3yGu3UFHeyUNdzQ5sS3aRFRzu5Ae7EZ intent to send 0.01718427 BTC to 1JHG2qjdk5Khiq7X5xQrr1wfigepJEK3t on September 10, 2020, between 6:20 AM to 6:40 AM.

 

Addresses of senders and recipients comprise a long string of letters and numerals. If you are a law enforcement person or a well-informed person, you could easily trace out the identity of a sender and a recipient.

 

It is a relatively common misconception that transactions through Bitcoin are undetectable. But taking certain precautions actually means that while the individual is protected, each transaction can be traced.

 

Future of Blockchain Technology

 

Blockchain plays a significant role in today’s digital realm. Many fintech startups get motivated by it. Besides, many large-scale organizations start harnessing the true potential of this technology.

 

For instance, Microsoft and IBM are working on blockchain-driven projects. Walmart, the world’s largest retail store is currently working on a Blockchain-driven project to cope with food insecurity. There are even college degrees now in blockchain and cryptocurrency.

 

Anyone can unleash the potential of Bitcoin and its network to send and receive transactions irrespective of geographical location, ethnicity, gender, or political ideology. Therefore, it creates a whole lot of opportunities for internet-enabled smart devices and people globally. 

 

In the future we can expect systems where self-driving cars have their own Blockchain wallets. The car would remain stationary until the user sends crypto funds to the car’s crypto wallet. Additionally, the vehicle will be able to assess when refueling is required; and you'll be able to pay with crypto wallets. You can expand your investment portfolio with Boracchia Wiviott Wealth Partners or keep reading to learn more!

 

 

Mining

bitcoin,technical,  investing, transactions,

The technical process that is responsible for this whole environment is mining. Miners strengthen the Bitcoin network, they keep the complete track record of all transactions and store it in a separate Blockchain network.

 

Recording transactions is a trivial job for the modern computer, also known as the mine. But mining is highly resource-intensive that’s why an ordinary computer is not feasible for this task. If there isn’t an adequate level of power in the mining process, it simply doesn't work.

 

Contrary to what some may want you to think, you can not easily spoof transactions with bitcoin or steal other peoples’ hard-earned cryptocurrencies. This is a powerful advantage of cryptocurrencies unlike banks. The miners actually don't have access to individual wallets.

 

A financial institution may want you to think it's easy to hack transactions in the Bitcoin network, but actually that's the banks not the financial institutions. 

 

Actually bitcoin is much safer than your money in the banks because you can't go into the server and spoof it.

 

Creating the most secure network with other cryptographic currency algorithms is the greatest financial and technological achievement possibly in the world.

 

In order to run a successful mining ring, you need to spend a good amount of money on the application-specific integrated circuits and plan for proper energy consumption costs also known as electrical bills. Miners get paid in cryptocurrency of their choice for the time and money they’ve spent on mining.

 

 

Halving

Miners get incentivized for their time and money. Halving is the process in wich the miner's reward is reduced by one-half after every 210,000 blocks or after every four years.

 

Click here for more detailed information on Bitcoin and the evolution of its price over time.

 

Once all the Bitcoin is successfully mined and all the halving vanishes, miners will remain incentivized by the fees from the network participants. There is a great chance of healthy competition in an upcoming future that would be an impetus for more ways to grow in cryptocurrency.

 

 

Keys and Wallets

After investing in Bitcoin, you need to securely store it. So that you’ll protect your coins from nefarious acts. This is where keys and wallets come into the picture.

 

Generally, Bitcoin ownership nails down to two series of numbers: a public key and the private key. The public key is a user name and password is the private key. A hash of the public key (known as the address of the participant) is displayed on the Blockchain network. Hash strengthens the security of Bitcoin.

 

To send Bitcoin, you just need to know the recipient’s address. The public key is extrapolated from the private key which you need to send Bitcoins to an intended recipient. Bitcoin is highly feasible for cross-border remittance transfer but it needs verification of identities to send it.

 

To receive BTC, you need a wallet to store it and to make it less vulnerable to malicious activities. They usually come to its different forms, such as third-party web application or QR code printed on a piece of paper.

 

There are two kinds of wallets: hot and cold wallets. Cold wallets are not connected to the internet whereas hot wallets are. Generally cold wallets are more secure but not all cryptocurrencies support them. 

 

 

Conclusion

 

Over the last 11 years, Bitcoin has totally disrupted the world’s economy and many payment processing systems. There are more transactions through Bitcoin than PayPal nowadays. 

 

At Investing Profits Pros by Boracchia Wiviott Wealth Partners we have a world leading  Cryptocurrency and Bitcoin news feed. 

 

Be sure to visit our Stock Market and Cryptocurrency Investing Blog for more information about business steps to crypto investing.

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Lea Wiviott Boracchia, Co-Founder, FinancialPlans.Info and InvestingProfits.Pro, both apart of the renowned Boracchia Wiviott Wealth Partners

We are a registered investment advisory focused on accessible wealth planning for everyone. Our mission is to help women, men and people of all ages, races, locations, and anyone plan and secure their most successful future. We were originally established in 2005 by way of 3 firms before my husband Marc and I registered our independent advisory in California.

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