As a new user, the first thing you do is to installs a digital wallet on your computer or mobile device. This wallet is an open-source software program that will generate your first and subsequent bitcoin addresses.
There are three types of wallets
- Software Wallet (installed on your computer)
- Mobile Wallet (which resides on your mobile device)
- Web Wallet (located on the website of a service provider that hosts bitcoins)
Click on Below Video: What is a Bitcoin Wallet?
Bitcoin Works Process
Bitcoin uses public key encryption techniques for its security purpose. It means when a new bitcoin address is created, a cryptographic key pair consisting of a private key and public key which are essentially unique, long strings of letters and numbers is generated.
Each address has its own bitcoin balance so all you need to do is to acquire bitcoins that will be held at one of the addresses in the wallet. You can acquire bitcoins in the number of ways by buying them from a bitcoin currency exchange or through a service that enables fund transfers between bitcoin exchanges and supports various payment mechanisms.
Click on Below Video: Bitcoin: How Cryptocurrency Work?
All bitcoin transactions are stored publicly on the bitcoin network, which means that the transactions and balance of any bitcoin address are visible to anyone. Therefore we recommend that bitcoin owners create a new address for each transaction as a means of privacy and enhancing security.
Once you have created your bitcoin address and acquired bitcoins, you can use them for an online transaction with other company that accepts bitcoins. The company will send you the bitcoin address in which you can send bitcoin payment. You direct the payment to that address; while the transaction process takes place within seconds, the verification process can take 10 minutes or longer.
All bitcoin transaction without exception is included in a shared public transaction log which is known as “Blockchain“. This is to confirm that the person spending the bitcoins owns them, and to prevent fraud.
Click on Below Video: How Bitcoin Works in 5 Minutes
How Bitcoin Works Step by Step Process for Beginner
Step 1: Download software on your computer or mobile to set up a bitcoin Wallet. This gives you the basic facilities to send and receive and to store bitcoin.
Step 2: Your software generates a unique string of letters and numbers that is your bitcoin address. The address is not attached to your name or any other personal data, but it identifies you to the bitcoin network. Give this bitcoin address to anyone who wants to pay you.
Step 3: Buy bitcoins with a standard offline currency either from another user or through a dedicated bitcoin exchange. Your digital funds are added to your bitcoin wallet.
Step 4: The bitcoin network authenticates transactions by recording them in the blockchain the underlying code that preserves the integrity of the currency.
Step 5: Use your software to send payments to other address. Divisions as small as 1,00,000,000 of a bitcoins are possible a unit called a “Satoshi” after the enigmatic currency inventor.
Advantages of Bitcoin
- As the first cryptocurrency to capture the public imagination, Bitcoin has “first mover” advantage, and a head starts over the competition.
- Total issuance is limited to 21 million, so it is doubtful to be devalued because of prospect and massive influx of new bitcoins.
- As a decentralized currency, Bitcoin is free from government interference and manipulation.
- Transaction costs are much lower than the with conventional currencies.
Click on Below Video: Benefits of Bitcoin