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What is Bitcoin? How it is Related to BlockChain? How it Actually Works?

by Naresh Kumar SEO, Digital Marketing, WordPress Designer
Bitcoin is a new Kind of money which is Used in Payment Network. It is a CryptoCurrency which is used for Digital Payment System throughout the World.

Underlying the use of Bitcoin is Blockchain. It is a Shared Public Ledger on which Bitcoin is Present. All-Transactions which are Conformed are included in BlockChain. This Way, Bitcoin Wallets can calculate their Spendable Balance and new Transactions are also get Tracked.

Here i am going to Explain how actually works and how it is developed, In My view for Example: 

I have one Banana with me. I give it to you.

You now have one Banana and I have zero.

That was simple, right?

Let’s look closely at what happened:

My Banana was physically put into your hand.

You know it happened. I was there. You were there. You touched it.

We didn’t need a third person there to help us make the transfer. We didn’t need to pull in Uncle Tommy (who’s a famous judge) to sit with us on the bench and confirm that the Banana went from me to you.

The Banana’s yours! I can’t give you another Banana because I don’t have any left. I can’t control it anymore. The Banana left my possession completely. You have full control over that Banana now. You can give it to your friend if you want, and then that friend can give it to his friend. And so on.

So that’s what an in-person exchange looks like. I guess it’s really the same, whether I’m giving you a banana, a book, or say a quarter, or a dollar bill….

But I’m getting ahead of myself.

Back to Bananas!

Now say, I have one digital Banana. Here, I’ll give you my digital Banana.

Ah! Now it gets interesting.

How do you know that that digital Banana that used to be mine, is now yours, and only yours? Think about it for a second.

It’s more complicated, right? How do you know that I didn’t send that Banana to Uncle Tommy as an email attachment first? Or your friend Joe? Or my friend Lisa too?

Maybe I made a couple of copies of that digital Banana on my computer. Maybe I put it up on the internet and one million people downloaded it.

As you see, this digital exchange is a bit of a problem. Sending digital Bananas doesn’t look like sending physical Bananas.

Some brainy computer scientists actually have a name for this problem: it’s called the double-spending problem. But don’t worry about it. All you need to know is that, it’s confused them for quite some time and they’ve never solved it.

Until now.

But let’s try to think of a solution on our own.

Ledgers

Maybe these digital Bananas need to be tracked in a ledger. It’s basically a book where you track all transactions — an accounting book.

This ledger, since it’s digital, needs to live in its own world and have someone in charge of it.

Say, just like World of Warcraft. Blizzard, the guys who created the online game, have a “digital ledger” of all the rare flaming fire swords that exist in their system. So, cool, someone like them could keep track of our digital Bananas. Awesome — we solved it!

Problems

There’s a bit of a problem though:

1) What if some guy over at Blizzard created more? He could just add a couple of digital Bananas to his balance whenever he wants!

2) It’s not exactly like when we were on the bench that one day. It was just you and me then. Going through Blizzard is like pulling in Uncle Tommy(a third-party) out of court(did I mention he’s a famous judge?) for all our park bench transactions. How can I just hand over my digital Banana to you, like, you know— the usual way?

Is there any way to closely replicate our park bench, just you-and-me, transaction digitally? Seems kinda tough…

The Solution

What if we gave this ledger — to everybody? Instead of the ledger living on a Blizzard computer, it’ll live in everybody’s computers. All the transactions that have ever happened, from all time, in digital Bananas will be recorded in it.

You can’t cheat it. I can’t send you digital Bananas I don’t have, because then it wouldn’t sync up with everybody in the system. It’d be a tough system to beat. Especially if it got really big.

Plus it’s not controlled by one person, so I know there’s no one that can just decide to give himself more digital Bananas. The rules of the system were already defined at the beginning. And the code and rules are open-source—you know, kinda like the software used in your mom’s Android phone. Or kinda like Wikipedia. It’s there for the smart people to contribute to, maintain, secure, improve on, and check on.

You could participate in this network too and update the ledger and make sure it all checks out. For the trouble, you could get like 25 digital Bananas as a reward. In fact, that’s the only way to create more digital Bananas in the system.

I simplified quite a bit

…but that system I explained exists. It’s called the Bitcoin protocol. And those digital Bananas are the “bitcoins” within the system. Fancy!

So, did you see what happened? What does the public ledger enable?

1) Its open source remember? The total number of Bananas was defined in the public ledger at the beginning. I know the exact amount that exists. Within the system, I know they are limited (scarce).

2) When I make an exchange I now know that digital Banana certifiably left my possession and is now completely yours. I used to not be able to say that about digital things. It will be updated and verified by the public ledger.

3) Because it’s a public ledger, I didn’t need Uncle Tommy (third-party) to make sure I didn’t cheat, or make extra copies for myself, or send Bananas twice, or thrice…

Within the system, the exchange of a digital Banana is now just like the exchange of a physical one. It’s now as good as seeing a physical Banana leave my hand and drop into your pocket. And just like on the park bench, the exchange involved two people only. You and me — we didn’t need Uncle Tommy there to make it valid.

In other words, it behaves like a physical object.

But you know what’s cool? It’s still digital. We can now deal with 1,000 Bananas, or 1 million Bananas, or even .0000001 Bananas. I can send it with a click of a button, and I can still drop it in your digital pocket if I was in Nicaragua and you were all the way in New York.

I can even make other digital things ride on top of these digital Bananas! It’s digital after-all. Maybe I can attach some text on it — a digital note. Or maybe I can attach more important things; like say a contract, or a stock certificate, or an ID card…

So this is great! How should we treat or value these “digital Bananas”? They’re quite useful aren’t they?

Well, a lot of people are arguing over it now. There’s debate between this and that economic school. Between politicians. Between programmers. Don’t listen to all of them though. Some people are smart. Some are misinformed. Some say the system is worth a lot, some say it’s actually worth zero. Some guy actually put a hard number: $1,300 per Banana. Some say its digital gold, some a currency. Other say they’re just like tulips. Some people say it’ll change the world, some say it’s just a fad.

I have my own opinion about it.

That’s a story for another time though. But kid, you now know more about Bitcoin than most. BlockChain leads to invention of Bitcoin, If you get trained on BlockChain Training you can learn about Bitcoin.

About Naresh Kumar Advanced     SEO, Digital Marketing, WordPress Designer

143 connections, 2 recommendations, 443 honor points.
Joined APSense since, October 6th, 2017, From Hyderabad, India.

Created on Dec 5th 2017 06:22. Viewed 200 times.

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