Cryptocurrency's LITERACY #2: The Truth is that Bitcoin does NOT EXIST!
Introduction
The main reason to do this Cryptocurrency’s Literacy Series is to explain and simplify the Cryptocurrency’s Science to people, I try always to not dig deep into technical explanation and stay at the fundamental layer. So Let’s getting Started!
Here is the second part of Cryptocurrency’s Literacy, my first part was about defining some usual words in cryptocurrencies, However, I wanted in this part to talk about Privacy in the blockchain and the cryptocurrencies that tackle with privacy’s issues, but I think that it needs some grounding before, this is why I decided to carry it forward to the next time and wrote at first this blog to define some words that we will use them in the next posts.
Did you ever ask yourself how do bitcoin or bitcoin transactions work?
In fact, there is no Bitcoin, there is no existence of bitcoin, those BTC in your wallet can not be compared to the way real cash exists, there is no physical neither a digital object that called Bitcoin!
Whaaat! No Existence of Bitcoin? .. Yes, this is the crazy part of all that thing!
Bitcoin do not exist anywhere, there is only records of bitcoin transactions because bitcoin was not created to be hold in a wallet, it was designed to be transferred and spent.
So, if someone Rachel wants to transfer some bitcoins to Eve, that transaction will contain mainly 3 components:
- Input: is the record of bitcoin address of the person that sent bitcoins to person Rachel
- Amount: is the number of bitcoin or Satoshi that person Rachel wants to send to person Eve
- Output: is the record of the bitcoin address for the person Eve
Therefore, to transfer bitcoins we will need 2 things:
- Bitcoin address: it is a sequence of Letters and numbers that are generated randomly to create a unique bitcoin address in each new transfer, it is safe to share it with others whenever you need a transfer.
- Private key: is also a sequence of numbers and letters, but it is the only thing that lets a person to unlock his wallet and send or receive bitcoins, it’s like passwords, so it should be kept secret.
Back to our example, to transfer bitcoins to Eve, Rachel needs to use her private key to sign a package of information - contains the Input, the amount of bitcoins and the Output (the address of Eve) – to the bitcoin network where it comes the role of Miners.
I write “Sign a package of information”! Why we will need a Signature! is this a letter!?
A Signature is a unique string of numbers that was calculated using a private key and other data. Its objective is to prove the ownership of a private key that corresponds to a Bitcoin address, without revealing the private key.
Miners verify the transaction and put it in a hash process, at the end they form the hash of the block header (the process named Mining a block) which will be included in the next block’s header, chaining blocks together (Blockchain)
More resources to go further:
Bicoin's Whitpaper
https://www.thebalance.com/how-does-a-bitcoin-transaction-work-391213
https://bitcoin.org/en/developer-documentation
https://www.ccn.com/bitcoin-transaction-really-works/
See you soon!
@dakster
Related Post :
Cryptocurrency's LITERACY : Learn the definition of some usual words
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BTC does not exist in a physical form and it is intangible. You cannot wrap your arms around one BTC but it is a crypto that will revolutionize the financial world.
Yes! Absolutely Agree with you!