The first thing we need to do as a new user is install a digital wallet on our computer or mobile device. This wallet is simply a free, open-source software program that will generate your first and subsequent Bitcoin addresses. There are three types of wallets – a software wallet (installed on your computer), a mobile wallet (which resides on your mobile device) or a Web wallet (located on the website of a service provider that hosts bitcoins).Bitcoin uses public key encryption4 techniques for security. This means that when a new Bitcoin address is created, a cryptographic key pair consisting of a public key and private key – which are essentially unique, long strings of letters and numbers – is generated.
Each address has its own Bitcoins balance, so all we need to do is acquire a number of Bitcoins that will be held at one of the addresses in your wallet. we can acquire Bitcoins through a number of ways – by buying them from a Bitcoin currency exchange such as Paxful, cex.io or through a service like Bitit.gift that enables fund transfers between Bitcoin exchanges and supports various payment mechanisms or invest in mining company like Genesis and gbminner etc.
Bitcoin is a digital currency that exists almost wholly in the virtual realm, unlike physical currencies like dollars and euros. A growing number of proponents support its use as an alternative currency that can pay for goods and services much like conventional currencies. Bitcoin is the first and easily the most popular cryptocurrency, or currency that uses cryptography to control its creation, administration and security.
Bitcoin was set up in 2009 by a mysterious individual or group with the pseudonym Satoshi Nakamoto, whose true identity is yet to be revealed and who left the project in 2010. It rocketed to prominence in 2013, when the value of a Bitcoin soared more than 100-fold in a two-year period, At its peak, based on more than 15 million bitcoins issued, the cryptocurrency boasted a market value of over $22 billion.
Here is how a bitcoin transaction is processed:
1) Payers initiate a bitcoin payment using “wallet” software
This and other pending transactions are broadcast on the global bitcoin network.
3) Once every ten minutes or so, “miners”, specialised computers (or groups of computers) on this network, collect a few hundred transactions and combine them in a “block”.
4) In order to mine a block and validate the transaction, miners compete to solve a difficult mathematical equation (a “hash function”). The miner that solves the equation first further processes the block and broadcasts this “proof-of-work” to the bitcoin network.
5) The other miners check the proof-of-work and the validity of the transactions. If they approve, the winning miner gets a reward of 25 newly minted bitcoin (about $6,900 at current prices), which is the incentive for miners to provide computing power. Adjusting the difficulty of the puzzle ensures that the supply of new bitcoins remains steady.
6) The mined block is added to the “blockchain”, a big, unbreakable ledger that lives on the bitcoin network and serves as a record of all transactions.
7) The payee can use his wallet software to see whether the bitcoin have arrived.