How Does Bitcoin Work?
How Do I Understand Bitcoin And Cryptocurrency?
Even though Bitcoin is one of the most Googled terms, it is a fairly technical subject for many individuals and might get extremely technical for non-geeks. However, there are now hundreds of cryptocurrencies, and an increasing number of people are interested in learning how they function, potentially due to a distrust of bankers, which is a whole new debate.
It is impossible to get a layman’s explanation without using technical jargon like “secret keys”, “digital keys”, “digital wallet” and “cryptocurrency”, so I will do my best to keep things as simple as possible.
The concept of fiat money, or paper currency, was developed to make it easier for people to exchange goods or services rather than bartering, which is limited to an exchange between two willing parties at best, whereas money allows you to provide your service or goods and then purchase whatever service or goods you require from another or others.
As a result, I would say that Bitcoin is the twenty-first-century counterpart of bartering, in that it works as a direct trade for products or services between two consenting parties. To offer and deliver the promised goods or services, bartering had to be based on each commitment and confidence.
Today, with Bitcoin or any other cryptocurrency, each party would require a unique file or key to trade the agreed-upon value.
Having a unique key or file makes it easy to keep track of each transaction. However, this also has drawbacks.
Now, bartering is the simple exchange of skills or goods as I have already stated, the modern equivalent, or bitcoin is susceptible to security breaches, i.e. theft or hacking of files, this is where a “cryptocurrency wallet” comes into the equation to secure your transactions.
Basically you need a secure location for your cryptocurrency/bitcoin purchases and holdings. This is where the need for a hardware wallet comes from.
So now that you have written down/recorded which address holds which amount of Bitcoins and then updated every time a transaction is made, the file is known as “The blockchain” – and it keeps a record of all transactions made with bitcoin.
