Many of you must be wondering what are bitcoins, how do they work, and how are they different from our normal currencies.
To start with, Bitcoins are digital currency that was developed in 2009 by a japanese programmer going by the name of Satoshi Nakamoto (Pseudo Name). Its based on an open source framework and the currency is protected by high level of cryptography for safety.
People often wonder how does a bitcoin gain its value. Our regular currencies are regulated by gold (bullion). Bitcoins are actually obtained by mining!!..No, its not the physical mining, a user has to solve a block of very complex mathematical and logical algorithms to earn bitcoin. But its not that easy though, solving such complex algorithm needs a lot of processing power on a continuos basis. Hence, arrays of high end servers are reuired to mine bitcoins. To overcome this limitation, programmers started what is known as a pool, its actually resource sharing. A user create a virtual worker and login to the specified pool using a mining application, the application connects to the pool chain and starts utilizing your computers processing resources to solve the algorithm. The more the processing power, the faster you can earn.
Processing power is called hast rate and is measured in MH/S, GH/S, TH/S. Each block og bitcoin has a difficulty factor to solving it and before the mining session starts, the hast rate to solve that particular difficulty factor is determined and the work is shared among the pool, the more people join, the faster it gets solved. The bounty is them divided among everyone according to the processing power that they contributed. A public transaction log is maintained by miners called the block chain, its the most integral part of bitcoin mining as it keeps record of each user and their ownership, it records transactions and prevent double spending.
You can create your account with any online provider for free or using applications such as Multibit to get your bitcoin wallet ID. This ID is needed for all transactions, its like a bank account. However, if you forget your ID or your login name, you lose your money forever as there is usually no way to recover it.
A lot of online stores accept bitcoins, in some countries actual stores accept bitcoin as well. In India, 90% of the population are not aware of bitcoins. Indian regulatory bodies and RBI doesnt recognize bitcoin as a valid currency but they haven’t made it illegal either, it will take some time for India to accept bitcoins because it completely overturns the normal practice of minting currency and creating a balance.
You can even buy bitcoins through online exchanges, current rate for a 1 bitcoin is 796$, thats approx 47,000 Rs for a single bitcoin. However, bitcoins are very volatile and the rate fluctuates by larger degree and variations which makes it a risky investment.
Its very important that you keep changing your transaction password often and store them safely as there are many trojans out there to steal your info and empty your bitcoin wallet.
Hope you must have got an idea about bitcoins by now, if you need any further info you can drop me a mail.