Blockchain (Public Ledger)

A digital public ledger keeps track of every BTC creation and transaction that takes place in the form of “blocks”. These transactions are recorded in a chronological order, which forms a “chain”. Therefore, it’s called a “Bitcoin blockchain”.

This digital ledger is decentralized and public, enabling anyone with an internet connection and a device to view any transaction in the network’s history. The blockchain’s history is completely transparent while users' identities remain anonymous.

A copy of this ledger is maintained by each User. Or the users can simply download the public ledger and view the previous transactions and history of creations. Think of it like a website, Any internet user across the globe can browse through the website, read the information and view the updated content.

Each time a transaction is made, a new block is formed and added to the chain further recorded in the public ledger. The verification of every transaction takes approximately 10-20 minutes. Those who verify and confirm these transactions are referred to as “Miners”.

The Miners have to solve a complex cryptographic puzzle online in order to verify the transaction. Transactions are queued up to be verified by network miners who attempt to verify multiple copies of the same transaction at once. This process is called “Mining” which is the distributed consensus system of the blockchain. 

As a reward for cracking the cryptographic puzzle and verifying the transaction, Miners are allowed to keep any fees attached to the transaction and are  rewarded in the form of Bitcoins. This is known as "Block reward”. The new Bitcoin created is handed to the successful Miner. Miners are then free to use, hold or sell these Bitcoins.

New Bitcoins are created every time a transaction is verified. Although there is a cap on the total supply of Bitcoin at 21 million coins, the protocol will stop producing new coins once that amount is reached.

The "block reward" halves every four years approximately, which is roughly the time it takes to create 210,000 blocks. The reward for mining Bitcoins was 6.25 Bitcoins per block following the most recent Bitcoin halving, which occurred in May 2020. The Bitcoin halving ensures the amount of Bitcoin distributed to miners reduces over time.

Currently, there are approximately 18.7 million Bitcoins in use, leaving 2.25 million Bitcoins available for circulation. Moreover, keeping in mind the halving principle and additional network variables like mining difficulty, the last Bitcoin is predicted to be mined around the year 2140.

Private Key

With 100s of transactions being processed at the same time, how do the miners believe that the transactions being processed are owned by a legitimate owner?  Blockchain technology is highly encrypted and secured. Let’s see how this technology makes sure all the data and transactions are occurring from a true owner. 

Similar to how you have your wallet to store your bills, a Bitcoin wallet exists to store your Bitcoins and other cryptocurrencies. The main purpose of the Bitcoin wallet is to generate ownership and provide security. 

Every Bitcoin wallet has a public and a private key. Transactions are encrypted and decrypted using these keys, which are sequences of randomly generated alphanumeric characters. 

A Public key is the code you can send to other users, to make transactions, similar to your Email address. Whereas the password to your E-mail address is the private key that should be secured and not shared. 

Transactions are signed using the private key, which serves as a mathematical proof that they originated from the wallet's owner. Additionally, once the transaction has been issued, the signature prohibits it from being changed by anyone.

A public key is generated from a private key via a one-way mathematical algorithm on the blockchain. You would not want to lose or forget your key, since it is impossible to regenerate the private key from the public key with this.

1. High Return Potential

With the growing number of individuals investing and taking interest in Bitcoin, it has higher return potential. The high volatility of Bitcoin prices, which can change significantly on a monthly and even daily basis, can be seen as a benefit by traders.

2. Liquidity

The ever-expanding list of places that accept Bitcoin is increasing as the days pass by. It can be used to make purchases as it only takes a few minutes to send money to another user. This has the benefit of having minimal fees, which makes using foreign currency and currency exchange easier.Additionally, it can be bought and sold at any moment.

3. Accessibility

Bitcoin is easily accessible by anyone across the globe with an internet connection and a device. It is also independent of any governing body. The transaction directly takes place between the sender and receiver which makes it even faster.

4. User Anonymity And Transparency

Bitcoin transactions are completely anonymous. These transactions do not require any personal details or sensitive information from either sender or the receiver. 

Although the transactions are always visible, giving you transparency, blockchain technology still protects them from fraud. Compared to a traditional currency system governed by a central body, personal data is required and can be hacked/leaked easily.

5. Security

Due to Bitcoin's extremely high security, it is impossible to forge or manipulate Bitcoins or its payment network. Bitcoin transactions are highly secured and encrypted with blockchain technology. 

The transactions are also irreversible which makes it even more secure. Since there is no involvement of a third party during the transaction, your money cannot be seized, frozen, charged, demanded, or stolen.

1. Highly Volatile

The price of Bitcoin fluctuates drastically, rising and declining quickly. There can only be 21 billion Bitcoins to ever exist, now the fluctuating factor is only the price. This scarcity is what makes Bitcoin so valued. 

Bitcoin’s volatility is highly influenced by the news headlines and the values are very uncertain which is perceived as bad by the investors.

2. Irreversible

Since a Bitcoin transaction is irreversible, there is nothing that can be done if the wrong amount is sent or if it is sent to the wrong recipient. If in any case, a user loses his private key, all his investments, funds, and Bitcoin are inaccessible.

3. No Government Regulations

A decentralised currency can be an advantage as well as a disadvantage. Here, there is no regulation and no one is answerable to any authority which means an issue/scam/fraud cannot be reported or compensated as it is irreversible. 

This is also one of the reasons why people fear Bitcoin transactions.

4. Limited Use

Bitcoin is being widely accepted as a payment option but only at limited places which makes its use minimal. 

5. Future Cryptocurrencies

As Bitcoin has a cap value of 21 billion, it might be replaced by other future cryptocurrencies retaining a superior secure network.