“Bitcoins – Bit + coins”, bit electronically represents digits, coins represents currency. So the term as a whole can be interpreted as digital currency. Image making purchases with virtual currencies, such a scenario is no way far from today. In fact it is already in existence outside India. Merchants prefer them, as the commission incurred is less than credit cards. They are implemented only for electronic purchases as of now. Facility to transfer bitcoins is also into existence.
How it works?
Bitcoins are not managed by any force, in other words “decentralized”. Every transaction will be recorded as a transaction log in a database, named as block chain. Block chain holds the details regarding transactions of every single bitcoin. Block chain will be regularly monitored by employees designated as “miners”. Miners verify, correct and update the transactions. Miners also ensure security and confidentiality for the data transacted.
Bit coins are produced by mining. 1.5billion+ bitcoins are in circulation till today. They are highly volatile and traded like any other foreign exchange currency. Speculators as usual buy bitcoins at lower price and see profits by selling at higher price. Bit coins are volatile as they lack liquidity and they are generated in a very limited numbers.
Say user A has to transfer bitcoins to user B. Every user will register with an address to buy and sell bitcoins. Once user A transfers it to user B, block chain will be updated by the ownership of bitcoins shifted to user B’s address. Every bitcoin user should hold a “bitcoin wallet” which can be obtained in laptop, mobiles, online etc. So, a transaction is transferring bitcoins between bitcoin wallet. Every transaction will be initiated only after a mathematical proof is obtained from the sender. The mathematical proof verifies the sender’s address which is similar to a private key in cryptography. Also, bitcoins are ensured that they are safe and secure on their way to receiver’s wallet. Bitcoins are on its way to revolve ecommerce soon.