Bitcoin is a virtual currency with no notes or coins . But it fulfills the same purpose as for example the euro: people should be able to pay with it. Bitcoins are calculated, encrypted data blocks. They are not created by a computer, but by many computers.
At the moment, there are not many ways to pay with Bitcoin. But many people think the currency is so promising that they are already investing a lot of money to own a lot of Bitcoin.
Why are bitcoins just so valuable?
That there is a currency that only exists digitally is difficult to understand for many people. The easiest way to compare it to gold is that it is very rare, so it is so valuable. Bitcoin are limited: the upper limit is 21 million bitcoins that can be created. There can not be more, that was stated.
That this digital currency is so much value at the moment, is, as already said, at its current popularity. When Bitcoin was invented, only a few people were interested - they were only worth a few cents back then. Over the years, more and more people wanted Bitcoin - and so did the value.
Why does the price of Bitcoin vary so much?
Two reasons: speculation and appreciation of the currency. As more people use Bitcoin to sell goods and services, the more it is valuable. And in addition, speculators believe that the currency will be valued, and buy and sell large quantities. Bitcoin's buying and selling markets also tend to have a much lower commission than other markets, which is extremely inviting to traders and speculative daytraders.
What guarantees the security of the transaction blocks, preventing them from being fraudulent?
Each block has a reference to the validation key of the previous block, with the exception, of course, of the first block, published by Bitcoin's creator in 2009. The blocks thus form a sequence. This sequence of blocks is called a blockchain, or block chain. This block chain is validated by the block validation keys. If you attempt to change something in an old block, the validation key of that block changes, and the block in front is no longer valid because it includes a reference to the validation key of the previous block. This generates a cascading effect that requires all the blocks in front of the changed block to have their validation keys recalculated.
As there are many miners, no one can generate the validation keys faster than the miners all together. When the fraudster finishes calculating the keys of the blocks he tried to defraud, the miners will have produced more blocks, so the fraudster will always be behind the miners in producing valid blocks.
Has a validated block transaction ever been aborted?
The older the block, the more unlikely it is for someone to be able to change the block, canceling a transaction from it, because for this it is necessary to calculate all validation keys faster than everyone else.
Bitcoin users always accept the longest block chain as "true". If at some point a Bitcoin user receives a chain larger than he has, he leaves the chain he has and moves on to another larger block chain. A rare event, but it can happen.
For example, two miners may end up producing blocks at the same time, with conflicting transactions. At this point, there are two chains of different blocks, but with the same size.
In this case, each miner chooses one of the blocks, and begins to calculate the key of the new block, using the validation key of the previous block that he chose. A miner will eventually discover a block, and the chain of blocks chosen by him will get bigger. At this point, all users will converge to this longer chain of blocks that has emerged. It is important to note that this is a rare occurrence. Therefore, when a transaction is included in a block, the transaction is considered as validated, practically irreversible. When 6 blocks are published in front of the block in which the transaction is included, the transaction has a near zero chance of being reversed, so it is considered confirmed and irreversible.