If you have heard about bitcoins, you might have heard about its cousin, Litecoin. These two are different but both are useful for the same purposes. Litecoin was created as an upgrade of the bitcoin project. Both currencies are similar but different enough that it is important for the new investor to understand them. Bitcoin trading is becoming the most popular and profitable trading in the world. I want to keep you up to date with it then you should also explore Bitcoin Up.
Bitcoin -Open-Source Currency
The major difference between the two currencies is that bitcoins are not issued from a bank. Instead, they are “mined” by an algorithm called proof of work which is done by users on the open-source software project. This public ledger, called the Blockchain, records all transactions on a distributed database. Transactions made with the help of bitcoins are not recorded in the public ledger but only in the private ( bitcoin wallets).
Functions of Bitcoin
The main function of the bitcoin network is that of a payments system. Transactions are not recorded in the public ledger so there are no statements relating to transaction costs. The lack of statements in the ledger makes it easier for users to know how much they are spending in terms of fees. It also allows for censorship by the users themselves. There is no centralization in the bitcoin network because the miners work together to decide how the network will run.
The major risk for new users is the danger posed by the risks of mining bitcoins. You can become a millionaire if you are smart enough to get your hands on just a few thousand bitcoins but the risk of losing these bitcoins is much higher. With this risk in mind, many traders prefer to first use a “wallet” which is like a bank account that holds only a very small amount of bitcoins. This way the trader can have a little control over his transactions and he can use the wallet only when he needs to.
Peer-to-Peer Technology
There are three main ways in which bitcoins are transferred from a wallet to a normal computer. One of these methods is called “peer-to-peer” or P2P transactions. These transactions are much more secure than the other two types of transactions because there are no third parties involved. The main problem with this type of transaction is that every transaction is recorded in the public ledger which makes tracking the transaction very difficult. The second method is called the “blockchain”, which is a worldwide public ledger that makes it easy for people to trace the history of each transaction in the same way as they would be able to trace a phone number.
A wallet does not provide any protection against the public ledger. If someone wanted to attack the bitcoin wallet, he would be able to do it easily since the transaction is recorded in the ledger. The best solution to this problem is to use a private key instead of a wallet. A private key is just like a password but it has no links to the public key. The owner of the private key controls the bitcoins that have been transferred.
Conclusion
Some people claim that the bitcoins that have been given to people as an award are not real money since they are not backed by any asset, such as money. However, this problem can easily be solved by the bitcoin network. The bitcoins can be backed up with an asset that will give them a fixed value. The value of the asset could be backed up by gold, silver, or any other asset that has a high market price.
Another problem that is being solved by the bitcoin network is called “transaction spam“. This happens when a transaction is made to a bitcoin provider and the transaction is not valid because of a malformed address. Since all transactions are recorded in the ledger, it is easy to find out if there are invalid addresses. These addresses are usually put there by malicious third parties who want to take control of the bitcoins that users send. A fix for this problem was created known as the “blockchain”.