Digitally Blind

Bitcoins, a name that is now frequently seen in newspapers, mainly in the news related to stock markets, would have made you think what it is. This curiosity might have been backed up but the increasing price it has. Bitcoin, once which didn't quite make up to value for 1 cent, is now booming at 1200$ last month. Currently the price is about 650$, as reported by Mt.Gox , and exchange where bitcoin - local currency trade is held. Much stories is found on the internet now, and I stumbled upon a funny one. A programmer, in 2010, sold 10000 bitcoins, each which was valued at 0.003$ at that time for 2 pizzas worth 30$. Now the same is worth about 6 Million Dollars. Now thats the Bitcoin effect.


Q: So, What is bitcoin?
A: It is a cryptocurrency.

Q: Woah.. Whats that?
A: It is the digital medium of exchange based on the concepts of cryptography. Err.... Cryptography is the study of techniques for secure communication with 2 people. You want to send something to your friend and ensure that no one else can read the data, you encrypt the data with a secret key, this makes the data just some garbled letters,numbers and symbols to anyone who read, but your friend can use the secret key(same or different) to decrypt back the data. There are 2 types of crytography- Symmetric key crytography and public key cryptography. There is only one key for encryption and decryption in the former, whereas there are 2 keys namely public key and private key in the later, one for encryption and the other for decryption. The bitcoin cryptocurrency is based on public key cryptography.

Q: So what is this.. bitcoin used for ?
A: It is the digital replacement for money. For a commodity or service or whatever, you can spend bitcoins instead of real money.

Q: Why? I have my netbanking account, I can use my money.
A:  Well, bitcoins are decentralized. ie., it is not controlled by a central authority. No body owns it. There is a client software that is used for transacting bitcoins, but that is open source. There is no need of a third party for the transaction. So you can be sure no one is spying on you. Because of this, bitcoins are booming on the black market. In addition to that the transactions are fast, irreversible by design, and cost very little compared to other payment networks.

Q: So how does bitcoin work?
A: As I said bit coin used public key cryptography. Apart from that it uses peer to peer networking (like a torrent, you connect to other computers directly, not to a server) and proof of work system (That is quite beyond the beginner level scope of this article, read it here.)


Author
Jamsheed K

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