Unless you’ve been living under a rock the past decade, chances are you’ve heard it all about Bitcoin and decentralized finance. The so-called cryptocurrencies are in the daily news these days, especially because of their sky-high price. Bitcoin is the leading cryptocurrency among them all. Since it’s not a physical form of currency such as the US Dollar, it can be a bit hard to wrap your head around it.

In reality, cryptocurrencies are very simple to understand. They can easily be described as electronic money made with cutting-edge tech. A cryptocurrency such as Bitcoin exists on the blockchain, a publicly distributed ledger that records all of its transactions. However, unlike physical forms of money, the blockchain allows anonymous transactions which is why people love it so much.

How Does it Work?

Many people have trouble realizing what Bitcoin and cryptos are. It’s actually pretty simple. Fiat money and currencies such as the US Dollar are controlled by centralized organizations – banks. They are controlled by the government which also dictates the price.

On the other hand, Bitcoin (and all cryptos in general) are decentralized – not controlled by banks or governments. They are controlled by a network of users who also verify the monetary transactions. This is all enabled by the blockchain, a virtual ledger that records all Bitcoin and cryptocurrency transactions.

While governments print money, Bitcoin is purely a virtual coin. It is earned by mining blocks with computers for which the reward is BTC. This is called mining and we’ll get to it later in the paragraphs below.

What is the Blockchain?

The blockchain is a specific type of database that differs from standard databases in the way it stores information. It is called a blockchain since new data that enters it is stored in blocks for mining that link to each other, forming a chain of data. The blockchain supports different kinds of information, but in most cases, it is used as a public ledger for transactions.

When it comes to Bitcoin, the blockchain is used in a decentralized way. It means that no single person or group controls its behavior. Instead, all users retain control. All decentralized blockchains can’t be reversed. Every Bitcoin transaction on trading platforms such as https://yuanpaygroup.app/ is permanent and can’t be altered.

It is permanently recorded into the blockchain and available to all users.

Bitcoin Mining

You’ve probably heard about Bitcoin miners. They are in the limelight for the environmental impact of mining which uses a lot of power for the computers that mine the blocks for Bitcoin rewards. Since the blockchain is a peer-to-peer network, miners are an integral part for the smooth running of the network. Without miners, there wouldn’t be Bitcoin to begin with.

In order to mine blocks of information for Bitcoin in return, a miner needs a high-quality computer. Once the miner gets BTC as a reward, they’re free to use it for crypto trading. Modern trading platforms rely on AI technology and use an intuitive crypto trading interface that even new traders won’t find hard to use.

Bitcoin Storage

Since you can’t store virtual coins in your wallet, the industry came up with digital wallets. There are two types of virtual wallets that store cryptos – hot and cold. Hot wallets are often offered for free at crypto trading sites. They store your Bitcoins online for easy access and are generally much easier to use.

Cold wallets are essentially pieces of hardware (USB storage drives, external hard drives) that store your virtual coins offline. They are much safe than hot wallets, but also make it harder to access your Bitcoins.