Bitcoin

Introduction

World is undergoing rapid technological progress change in the recent times and our way of making payments is also undergoing vast transformations. Bitcoin Payment is also a product of this transformation which has been invented for anonymous payments without the involvement of any governments. Bitcoin is a crypto currency which uses cryptography for its creation rather than any designated authorities. Bitcoin is based on peer to peer decentralised network (Segendorf 2014).

Bitcoin came into existence in January 2009. It was designed by still-mysterious person Satoshi Nakamoto. Nakamoto described the protocol in a white paper published in late 2008 and then released it as an open source projects (Zohar 2015). It was mainly developed to keep the user identity anonymous protected by pseudonyms, transactions will be decentralised and no one will be in charge of it not even Nakamoto. Currently there are around $14.6 million bitcoins in circulation with an estimated value of around $3.4 billion (Extance 2015). Its operations are based on block chain- online ledger of every bitcoin transaction and also serve as a data structure which allows records to be maintained and updated with a very minimal chance of hacking.

Research/Findings

How Bitcoin Payment Technology Works

Bitcoin payment can be made between anybody using a software called wallet. It can be on your computer, tablet and smartphone. So, if x wishes to send bitcoins to Y it will be made using encrypted messages. X will use public key of Y’s wallet to encrypt the message so only Y can decrypt the message with private key of its wallet which serve as an address.

X Y

Fig 1: X wants to send bitcoin to Y

Encrypting the payment transaction creates a hash. After this payment order is issued to the Bitcoin network. The users in this network are called miners. Every 10th minute miners gather the transaction occurred in this period and this round is called as block. The task of the miners is to verify the transaction and adding the block to the blockchain. The payments are verified by means of miners solving