Everything you ever wanted to know about bitcoin (but were afraid to ask) 3/5

BY DARREN WALL

Wow. Doesn’t this sound a little illegal?

Some countries, such as India, have prohibited the trade of bitcoin. Some say that they’re banning non-centralized crypto-currencies because the government can’t trace transactions (or, perhaps more to the point, collect taxes).

But that’s the cynic’s view. The service in itself is absolutely not illegal – as long as where the money goes when it’s transferred isn’t used for illegal activity. But you could say that for all currency.

How does this not immediately fall apart?

Your bank account is an established (and regulated) form of digital currency. You have money (which is represented by numbers in an account), which you can transfer to someone else in return for goods and services. You probably use your cash card or mobile payment system more than you use dollars and coins these days.

So you’re already pretty familiar with the concept of electronic cash. The main difference here is that rather than one organization taking care of your numbers, a collection of computers keeps the numbers safe.

It is a valid concern that anonymity could facilitate criminal activity, although this certainly doesn’t imply that users of Bitcoin have unlawful intent. So you can see why it’s controversial. But no – it’s not illegal.

I’ve heard about bitcoin wallets. What are they?

Good question. And this is where the story gets interesting.

A bitcoin wallet is a dedicated program that stores your bitcoins, in the same way that your physical wallet holds your notes and cards. The digital wallet is stored on your desktop computer or on your smartphone. Bitcoin can be stored on the web, but this raises security concerns.

Are Bitcoin wallets safe?

If you lose your bitcoin wallet, you lose your money, just like if you lost your physical wallet. Except your digital wallet was potentially worth millions of dollars.

There are stories floating around the internet of a sorry gentleman who threw out his old computer and forgot to back up his bitcoin wallet. He’s regularly spotted raking through the trash at his local dump.

Allegedly.

If you forget your PIN or password, or you lose your hard drive, or it’s hacked or stolen, the value store becomes forever inaccessible. Experts recommend storing your wallet offline where it’s less vulnerable to ransomware. Just in case.

A regular internet-enabled bank account allows you to access your money (and transfer your numbers) from any computer connected to the internet.

If it’s safer to store your digital wallet offline, that means you can only access your funds from the computer that holds the wallet.

There’s a selection of mobile apps that allow you to control your digital wallet securely.

So how do you spend your bitcoin?

Transactions are recorded onto the blockchain as a file, confirming that “Bob gave Andy 5 bitcoin on [insert date and time here].”

Lucky Andy! What did he do to gain such favor?

The point?

The transaction is signed by Bob’s private, encrypted key and broadcast to the P2P, which validates and records the transaction.

Can’t this blockchain just fall apart?

The blockchain is publicly distributed, so it is potentially open to hacking. However, it’s heavily cryptographically protected. The data is divided into multiple small blocks.

Individually the blocks don’t mean anything to a hacker.

The total bitcoin blockchain is estimated at around 100gb in size. The entire chain is required to crack the encryption. And there could be, like, tons of blocks. Thousands. Millions. Superquadrillions.

Because the blockchain uses the computing power of thousands of computers around the world, it probably means hacking into thousands of computers, undetected, all all the same time. So it’s pretty safe.

However! There have been successful hacks, losing groups and individuals hundreds of millions of dollars. (But they might not have deserved those hundreds of millions of dollars in the first place. So don’t feel too bad.)

Hacks have broken into individual wallets, rather than “breaking” the blockchain. A wallet could be compromised, stolen, cloned, or manipulated.

https://en.softonic.com/articles/everything-you-ever-wanted-to-know-about-bitcoin-but-were-afraid-to-ask?utm_medium=push&utm_source=softonic&utm_campaign=705efced-c40b-47ca-a25a-a681104c16fa&utm_content=

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Let's go into the financial industry, value of BTC, payment for goods or services etc tomorrow!!!

Lookout for Friday's Post when it all comes together.... Have a fabulous Wednesday!