How the Bitcoin payment system works ?
Like other payment systems, Bitcoin exists by transferring funds from one user to another. Only a special unit of account – the BTC coin – acts as a means. The process of exchanging coins between users is called a transaction. As a result of the transaction, a predetermined number of coins is transferred from bitcoin wallet “A” to wallet “B”, which has its own independent address. Transactions are based on blockchain technology. Blockchain is a decentralized distributed database that stores transaction data on the Bitcoin network. Transactions are written in blocks, which are linked by headers. The blocks are connected in a sequential continuous chain, hence the name blockchain (literally – a chain of blocks). After creating a new block, the BTC transfer receives the status of confirmed, and the recipient becomes the owner of the agreed amount of BTC. Once again this could be useful for instant payments such banks or prepaid cards where it would not take much time to get them after verification/verification at most branches – We’ll talk about these transactions later how we can use our private keys without any risks.
Mining is the process of creating a new block in a chain, for which the computing power of computer processors (central or graphic) is used. For confirming transactions, miners receive a reward – a fixed amount of BTC for a new block (at the end of 2019, the reward is 12.5 bitcoins) and a commission for processing exchange operations, which is determined by the sender. Miners allow the system to function normally, issue cryptocurrencies and process transactions independently of each other or the superior administrator. Bitcoin mining uses Proof-of-Work consensus or proof of work. This means that in order to receive a reward for creating a block, you need to spend a certain amount of computing power on your computer. As a result, the miner will create a new block with the probability the more, the more power he spent on its solution. It takes 10 minutes per 30 blocks total so far; if not finished within 5 hours it can be rejected at least temporarily as all difficulty becomes zero. Once completed they are placed into the public ledger known bitcoin blockchain using various algorithms, including SHA256 + Scrypt Hash Algorithm depending upon hashrate achieved via GPUs from Maxwell’s GPU Core architecture Proofs Mining includes this method although many enthusiasts prefer hashing over PoW but still needs very large pooling pools such Gridcoin has been actively involved thus now runs an ICO called GHashStake project where their initial goal is ~ $35 million USD.
The most important advantage remains the reliability of the blockchain. Every day, scammers break into ATMs, steal funds from bank cards and customer accounts. The Bitcoin network has not yet experienced technical failures caused by the system itself, and the first cryptocurrency has existed for more than 10 years. Many experts believe that blockchain-based payment systems are capable of replacing the existing bank transfer system, especially at the international level. “It will take less time to conduct these transactions on a global scale since there is no need,” said Aron Kalinan (a former professor), coauthor with Emin Gün Sirer, which was published in May 2015, along your fellow bitcoiners. Nowadays all financial institutions must receive confirmation through email addresses, however they do so only if their identity can be verified online or offline using public keys stored publicly available storage servers like Amazon EBS Cloud Storage service where users have access over digital wallet files such as wallets hidden inside encrypted documents known within each user’s file folder called ‘keys’.
Independence. The system has no centralized management, issuer or administrator. Nobody has the right to block your transfer, regardless of its purpose and amount. There is no node that can legitimately track the status of your cryptocurrency account or analyze shipments and payments. Confidentiality. Transactions on the Bitcoin network are transparent – you can find out the amount sent, block number and transfer time. But the specific bitcoin addresses of the owners, and therefore their identity, cannot be traced. This principle is called pseudonymity – you can find out how each bitcoin ended up in the face value of the current transaction, but you cannot reveal the identity of the sender and recipient. Low fees. On average, Bitcoin network fees are less than one cent. The faster you need to make a transaction, the higher the commission, although it is set entirely voluntarily and has historically never exceeded $ 20. For this reason, low-income users should consider switching away from using cryptocurrencies with unreliable transactions at all costs and instead adopt alternative investments (like gold) for future financial planning. It’s better than letting something remain illegal forever! Privacy. Cryptocurrencies do not keep any private information about themselves: they don’t store them anywhere except within an online wallet like Bitpay, Coinbase etc., nor does anyone know what data were kept there such as public key identifiers. You only have to give some access rights over encrypted keys by signing off certain messages which tell someone who stole these bitcoins whether he/she was trusted enough.