Bitcoin is a cryptocurrency that is categorized as a “defi” or a decentralized finance currency. This means that bitcoin is run by thousands to millions of computational power instead of one big stakeholder. Maybe you are still curious about how do bitcoin work. We will solve that and give you a simple as well as a packed explanation.
Bitcoin has been a prevalent digital currency and it was created on the date January 2009. It had a stable price of a couple of dollars. Within years of development, bitcoins started to gain price as well as momentum. It was created by a mysterious person called Satoshi Nakamoto.
The identity of the person who created this technology is still a mystery up to this date. But even with the disappearance of Satoshi, Bitcoin has always been a very complex and favored cryptocurrency. It is the father of all cryptos.
Why is Bitcoin so expensive?
Many people have asked about why the price of Bitcoin itself is so expensive. Because bitcoin cannot be physically touched, but the price itself is way much higher than gold. There are many reasons due to the skyrocketing price of bitcoins.
Bitcoins have not always been popular. But one key role in making this cryptocurrency very popular is due to media exposure. News channels such as BBC, CNN, and many more are starting to give cryptocurrency it’s the spotlight. In a matter of years, Bitcoin has grown in demand.
Wherever there is demand, there will be supply. And in this case, Bitcoin’s supply is starting to get a little scarce. It is known that there is only a maximum amount of 21 million bitcoins in circulation. And on top of that, 18 million of it has already been mined. This leaves a very close gap of 3 million Bitcoin. No one knows what happens after all of the 21 has been mined.
Many analysts has predicted that the price will keep on going up. This is because demand will become more scarce everytime supply increases. In this case, the amount of investors or users will keep on increasing. This is how the prices gets driven up and a part of how do bitcoin work.
How do Bitcoin Work?
Bitcoin uses a specific type of technology that is called the blockchain. To make it short and simple, bitcoin is stored in “keys”. These kinds of “keys” are a long string of numbers as well as letters. Each key has its own encryption. That is why bitcoin can never be hacked and it is known as a very secure currency.
In order for you to send a bitcoin to another user, you need those bitcoins decrypted. All of these need a lot of computational power. That is why blockchain technology relies on computers.
Each of these computers will process all of the money in circulation. Hence they are named as “miners”. These miners will gain a small amount of reward within every transaction that is completed.