Bitcoin is a trending topic today due to the surge in its value in comparison to traditional currencies. The peak value of bitcoin was staggeringly high—several times the per capita economic output of Bangladesh. In this context, an obvious question would relate to the relevance and applicability of bitcoin in our lives.
However, first, it is important to understand what bitcoin is. Bitcoin is a cryptocurrency and a worldwide payment system that functions on the blockchain technology. The publicly distributed ledger created by blockchain technology requires a cryptocurrency to conduct transactions. Bitcoin is one of those cryptocurrencies. While there are many cryptocurrencies available for use, bitcoin has emerged as the most popular around the world.
If bitcoin is to be considered a currency like the Bangladeshi taka, we would need to know how to use it. The users of bitcoin require wallets for storing their coins. The wallets can be physical—a small hardware device, or software-based—stored in a computer. In either case, the currency can only be put to use via computers connected to the Internet. Further, smartphones can work as substitutes for computers. Users can opt to keep a part of the ledger with them in their computers if they intend to perform complex transactions.
The users can also play the role of transaction verifiers. In the world of bitcoin, such users are called miners. Miners verify transactions and vote to validate them and make the entries permanent. Miners are usually rewarded by bitcoins freshly mined out of the system after fulfilling predefined criteria, and the amount is determined by the computer algorithm.
The role of bitcoin miners overlaps with that of central banks in some areas. For example, we have central banks to print and issue currencies in our existing economic system. Their promise of a currency bearing a certain value is usually guaranteed by the governments supporting them. As a result, the central banks enjoy the privilege of printing money and managing inflation according