This network also validates all the transactions through Bitcoin Coin Market Cap.
How does Bitcoin work?
Internet users transfer digital assets (bits) to each other on a network. There is no online bank; rather, Bitcoin has been described as an Internet-wide distributed ledger. Users buy Bitcoin with cash or by selling a product or service for Bitcoin. Bitcoin wallets store and use this digital currency. Users may sell out of this virtual ledger by trading their Bitcoin to someone else who wants in. Anyone can do this, anywhere in the world.
There are smartphone apps for conducting mobile Bitcoin transactions and Bitcoin exchanges are populating the Internet.
How is Bitcoin valued?
Bitcoin is not held or controlled by a financial institution; it is completely decentralized. Unlike real-world money it cannot be devalued by governments or banks.
Instead, Bitcoin’s value lies simply in its acceptance between users as a form of payment and because its supply is finite. Its global currency values fluctuate according to supply and demand and market speculation; as more people create wallets and hold and spend bitcoins, and more businesses accept it, Bitcoin’s value will rise. Banks are now trying to value Bitcoin and some investment websites predict the price of a bitcoin will be several thousand dollars in 2014.
What are its benefits?
There are benefits to consumers and merchants that want to use this payment option.
1. Fast transactions – Bitcoin is transferred instantly over the Internet.
2. No fees/low fees — Unlike credit cards, Bitcoin can be used for free or very low fees. Without the centralized institution as middle man, there are no authorizations (and fees) required. This improves profit margins sales.
3. Eliminates fraud risk -Only the Bitcoin owner can send payment to the intended recipient, who is the only one who can receive it. The network knows the transfer has occurred and transactions are validated; they cannot be challenged or taken back. This is big for online merchants who are often subject to credit card processors’ assessments of whether or not a transaction is fraudulent, or businesses that pay the high price of credit card chargebacks.
4. Data is secure — As we have seen with recent hacks on national retailers’ payment processing systems, the Internet is not always a secure place for private data. With Bitcoin, users do not give up private information.
a. They have two keys – a public key that serves as the bitcoin address and a private key with personal data.