What is Bitcoin ?| How Bitcoin works and why is it so popular? | Sohail Khan| part 2

 A copy of this ledger exists on all the systems that are a part of the Bitcoin network

Those that run this system are called 'Miners'

What is  Bitcoin ?| How Bitcoin works and why is it so popular? | Sohail Khan| part 2

The job of the miners is to verify transactions

Say, A has to transfer 2 Bitcoins to B's account

Miners will have to confirm whether A does have 2 Bitcoins in his account or not

To complete the transaction, miners will have to solve a complicated mathematical equation

You might have studied variables back in school. Every Bitcoin transaction has a unique variable

The job of the miners is to calculate it

It's not that they sit with a pen or paper to solve the equations

All these calculations are carried out on the computers automatically because they are extremely complicated and their combinations run in crores

which is why these miners require computers with very complex and high processing power

Once the equation is solved, the other computers within the network confirm it and this transaction is added to the chain

A block of transactions gets created. And hence, the technology is called 'block chain'

And what do miners get in exchange for this? They get the most valuable thing- Bitcoins!

This system is called 'Proof of work'

The miners have to prove the computation work they do to get awarded the Bitcoins in return

If all this explanation went straight above your head like a bouncer, then do not worry!

Because understanding the philosophy, vision, and future of crypto technology is far more important than understanding the working of crypto technology

now comes the question of how to use cryptocurrency and Bitcoins

It is extremely important to understand that as well. Because on one hand, some people use Bitcoins as an investment

while on the other hand, some people use cryptocurrency as an alternate currency

A lot of people want to replace it with currency and use Bitcoins in place of rupees and dollars

But the main use of cryptocurrency at present is like an investment

We invest money in cryptocurrency hoping for a higher return in the future and hence get more money in return

This, then becomes a "store of value", just like Gold.

Just like we don't use gold in our daily transactions but instead, buy it and store it in the bank lockers like a guarantee

to get more returns in the future because the price of gold keeps rising gradually

People do the same with Bitcoins and this is why Bitcoins are also called "Digital Gold"

What is  Bitcoin ?| How Bitcoin works and why is it so popular? | Sohail Khan| part 2

But just like any other investment, this too entails risks. And those who criticize this as a form of investment say that

Bitcoin is a digital currency. It has no inherent value of its own

For example, you can physically touch the gold in your hands. If you buy a house as an investment, it will be physically available to you

Bitcoins, on the other hand, are not physical. Everything is happening on the computer

It could still be referred to as a "niche product" that does not have widespread acceptance in the society

Cryptocurrency is not yet a medium of exchange, that is, you cannot go to the nearby shops and buy bread and eggs with Bitcoins

But this trend might change in the future because

there are several restaurants and hotels in Western countries that have begun to accept Bitcoins as an alternative form of payment

There is a technical challenge here that makes it difficult to use Bitcoins as a medium in daily transactions.

What is  Bitcoin ?| How Bitcoin works and why is it so popular? | Sohail Khan| part 2

The Bitcoin transactions on the blockchain take time to get confirmed. One block process takes around 10 minutes for the computers to calculate

So, you can understand that it is not practical to wait for 10 minutes for a transaction to get completed in daily life

But at the same time, there are some present-day use cases for Bitcoins where they work better than our traditional ways

The best example of this is our Foreign Funds transfer

When you have to transfer money from one country to another, the banks deduct a lump sum in the name of foreign transfer fees

They charge a lot of fees and take a lot of time to transfer money from one country to another

Bitcoins are more economical in this case. Bitcoins do not charge any transfer fees and ten minutes is a much lesser time as compared to the 1 to 2 days that the banks take

A similar thing applies to the credit card fees

Cryptocurrency can be more economical than credit card fees

This is why banks, credit card companies, and remittance companies have been against Cryptocurrencies and are so even today

because Cryptocurrency can become a rival to their business model

In the last few months, especially due to the Covid pandemic, situations have changed. While several industries and mutual funds have been struggling,

the value of Cryptocurrencies like Bitcoins and Ethereum has been on the rise

From the 1st of March, until November 30, the value of Bitcoin has risen more than 120%, that is, it has more than doubled in value

Paypal, the world's biggest digital payments company, has introduced the feature of crypto transactions in November

J P Morgan Bank used to be the biggest foe of Bitcoins. When Bitcoin was on a bull run in 2017,

that is, when its price was rising exponentially, the CEO of JP Morgan had said that it was a fraud

 CEO of JP Morgan

And now, just a few months ago, JP Morgan has opened corporate accounts for famous crypto exchanges like Coinbase and Gemini Trust

So you can see how the doors that had earlier been shut for cryptocurrency have now been opening-up

Open-mindedness is being observed concerning cryptocurrency in the general public and the financial industry.