What are bitcoins and how does it work?

What are bitcoins and how does it work?

This is the continuation of my previous blog about Bitcoins.I will make you understand in a interactive way of question ans answers.So here it is...

What is Cryptocurrency?
As the name tells it all, any guesses.?Yes it is a currency which is encrypted.!But how money can be encrypted and what is the necessity of money encryption?Well in the previous blog i mentioned it all in secure transaction section.

So moving it to answer to this question, here it is:

• Its a money which uses some kind of algorithm(SHA-256, Scrypt).In simple terms this algorithm ensures faster and secure transactions, transaction history through Public Ledger or Blockchain. Algorithms define some rules for creation of these money and ensuring proper usage of these currencies.It is a bunch of programming codes.
• Its a kind of peer-to-peer money.This is a great boost to crypto currencies over fiat currencies.This means that that this money is controlled by everyone who is generating this money(Mining).This also means that when it is used for transfer of funds there is no third party involved.!That is why crypto currencies have negligible transaction fees.

Let us go little bit deep inside
Mining Simplified- Mining refers to generation of coins.Now at first it becomes very hard to digest  that how normal people can generate money.!(yea you can also), but this comes with conditions which paradigm the algorithms.But why they are giving you power to mine or generate coins.?because it is a quid pro quio.Actually when you mine, you are generating money as well as  help in transacting other people's money.In nutshell you are lending your computer power to bank network.(Think like this as banks spend billion of dollars to maintain their servers and networks to ensure proper money transaction, maintaining security and couple of million dollars as current bill and pay-offs.)You are just hosting a server from your computer.Now the size of this server depends on the hardware you have invested.

• Decentralized- This means that the network of these currencies is not centralized that is shared by everyone.Advantages of having these type of network is that if some hacker wishes to hack a network it becomes difficult for him to hack each server hosted individually by the users.And it eliminates the cost and effort to maintain a central server as done by banks.If any computer fails in these networks it is not affecting the network in a whole.Only possible way to hack these network is to hack each and every computer which is mining.And if government wants to ban bitcoins, they have to do the same.The concept is like Bit-Torrent and that is why government in spite of it's full effort can not stop Bit-Torrent.If government wishes to stop these they have to do like 5 Afghanistan war..!

Now, how to generate these coins?
For generating or mining these you need following:

1. A wallet (can be offline/online) is specific to the coin which you mine.  FREE
2. Mining software is common for all the coins.                                       FREE
3. Mining hardware                                                                                FREE

If you know the technical aspects of bitcoin, here it is (Courtsey - Khan Academy)



                                                            Bitcoin – Overview

                                                              Bitcoin – Proof of Work

                                                   Bitcoin – Transaction Block Chains

                                                        Bitcoin – The Money Supply

                                                          Bitcoin – Digital Signatures

                                                     Bitcoin – Transaction Records

                                                  Bitcoin – Cryptographic Hash Functions

And as always, have a great day.!


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From Scratch - about Bitcoins and other coins

For all those who are completely naive about Bitcoins and other crypto-currencies,I am dedicating this blog to them.This blog will have a series of lessons to make you understand about these revolutionary concept.
If you are here to know about  how to set-up a mining rig ,wallet, investment purpose then stay calm.coming soon.

First question i asked myself about 1 year ago was that why learn about these coins?
Nobody does anything which will be in vain.So why yous should know about these coins.Here are some points and many more to come as you go along this blog.

1. Transaction cost -To transfer a mount via Western Union/PayPal/Wire Transfer or any kind of remittance can cost you much.It is not big deal for rich folks, but for most of us it counts.Here is a example:
   
   How expensive are Western Union fees?
                   
   "Money transfer fees for Western Union are quite reasonable. You will find a flat rate for several services. Sending and receiving a $100 in the United States runs between $8.00-$10.00"
   http://www.ask.com/question/how-much-is-the-western-union-fee
       
   When the remittance amount is large the extra charges by Western Union can hurt you.For sending $100000 it can charge you like $6000.
   Whereas Bitcoins transactions can cost in cents.How it does i will explain.
   
   Same is  with PayPal.And worst is with any Bank Transfer/International Wire Transfer.Does it need to be explained ?
2. Secure transaction -Now a days often one can find reading through news of credit card fraud, bank passwords hacking.Even the encrypted passwords and all the security measures taken by bank can be exploited.
   
   Here is a link:
   http://www.theguardian.com/world/2013/dec/27/target-hackers-stole-pin-numbers
   
   Whereas Bitcoins uses a special SHA-256 algorithm to ensure secure transactions.But honestly speaking this can also be exploited.Don't worry i am here to show you the way you can protect yourself from this attack by a method of storing your currencies in a offline wallet.Later i will show you how to setup one.
3. Need for Speed -Everyone wants fast transfer and for that Western Union charges you hell lot, then also it will need 2 days time.And speaking of bank transfer it is going to take long time ..!.
   
   Suppose you want to transfer money from country X to country Y.Country X's bank is going to charge you for transferring money to Country Y's bank and converting Country X's money to Country Y's money.It is going to cost you time and money.(Both are precious)
   Cryptocoins transaction can take place between 2-10 minutes.

Another important thing is that at this point of time everything which matter is money.Every war which is taking place between countries, races, religion is because of power and money.We can think  of power as a commodity which is divided among people in a hierarchical manner starting from big players(Ministers, CEO's, bureaucrats) then to middle class citizens and last negligible residue to poor people.

Government prints fiat currencies as per their will to give impression of development of economy.But this in turns brings inflation as for every extra money printed the value for that particular currency decrements.
Some questions to feed your curiosity.


Why should the Banks earn through our money? while we work hard to earn and they simply earn by sitting on their chair.
Why there is no common money for the whole world which knows no boundaries?
Why only law agencies  are allowed to pry on the bank accounts not every common man.?remember Law agencies are just face of government.
Why there is no transparency how the banks ,law agencies and government works? 
Why spending of billion of dollars for setting up server and  security measures by banks?Which in turn consumes tons of electricity and produces pollution and yet extremely vulnerable to hacking.! 
What is the need for democracy if everything  is controlled by some central authority, without any transparency to the people.?

Do you wish that there should be some kind of currency which mitigates all these above problems besides providing you some other incentives.?
How would you feel if for any transaction happening across this world can be seen anyone and everyone gets a percentage of the transaction fees including you.?
How would you feel if there is a currency which is inflation-proof  and will give assured high return for long time investment. 

Bitcoins price chart ever since it's inception

Today it's 1 unit=950 USD.

This is why bitcoins investment and trading is the new weapon of wall street folks.
1BTC=4 cents (2009-2010)
1BTC=950 USD (2012-2013)

Some guys gave it a thought and decided why not to decentralize the power and money equally to every individual on Earth.They are the real heroes of our time.Satoshi Nakamoto is one of them.

This is why lobbyists, government,companies and banks are giving their full effort to stop Crypto-Currencies to reach to public.Bitcoins is bankers worst fear.But with your individual help i believe we could bring wind of change. I am not a middle man or any agency whose job is to promote Bitcoins.As a responsible resident of Mother Earth i believe it is my moral duty to make you all aware of this technology and revolution to bring up a libertarian society.

And as always, have a great day.!

If you have any questions, please post comment.I will be more than happy to help you. 




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