What is Bitcoin and how does it work?

Bitcoin is a cryptocurrency, or a digital currency, that uses rules of cryptography for regulation and generation of units of currency. (Picture: Getty)

Bitcoin is talk of town these days. On one hand, Japan consider bitcoin as a legal tender, while on the other, JP Morgan Chase CEO James Dimon calls it little more than a “fraud”.

Investors or traders of Bitcoin faced chaotic situation after Shanghai-based BTCChina, a major Chinese bitcoin exchange, on Thursday said it would stop trading in the crypto-currency from September 30, citing tightening regulation, while smaller bitcoin exchanges ViaBTC, YoBTC and Yunbi on Friday announced similar closures. This sent negative signal to the world in relation to Bitcoin.

Indian government also is not looking happy with Bitcoin. The Reserve Bank of India official Sudarshan Sen on September 13 said that the central bank was uncomfortable with “non-fiat” cryptocurrencies like Bitcoin.

The digital-currency has plunged over 50 per cent in the past 13 trading days.

What is Bitcoin?

Bitcoin is a cryptocurrency, or a digital currency, that uses rules of cryptography for regulation and generation of units of currency. Bitcoin falls under the scope of cryptocurrency and was the first and most valuable among them. It is commonly called a decentralised digital currency.

Bitcoin was invented by Satoshi Nakamoto in 2009.

How Bitcoin works?
Hitesh Malviya, Bitcoin Expert, itsblockchain.com explains, Bitcoins are completely virtual coins designed to be ‘self-contained’ for their value, with no need for banks to move and store the money.

Once you own bitcoins, they possess value and trade just as if they were nuggets of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years. Bitcoins are traded from one personal ‘wallet’ to another.

A wallet is a small personal database that you store on your computer drive, on your smartphone, on your tablet, or somewhere in the cloud.

Source – economictimes.indiatimes.com