What Is A Bitcoin And How It Works?


What is a bitcoin? Before answering it let me ask you two simple questions. Have you ever thought that why we need a currency in the form of coins & notes only? Why can’t we have a virtual money?

Well, the simple answer to all your questions is “Bitcoin”.

what is a bitcoin?

What is a Bitcoin?

Bitcoin is a digital currency which is created & held electronically. Bitcoins aren’t printed on any physical materials as we print on rupees, dollars, euros.

The most important characteristic of bitcoin is it is decentralized i.e it’s currency value is not controlled by any government or banks.

Bitcoin was invented by some unidentified programmers, under the name of Satoshi Nakamoto. And they released this bitcoin as open source on 3rd January 2009.

How are Bitcoins created?

You have to install a bitcoin wallet software on your computer. Once you installed you need to create a bitcoin address. “Bitcoin address” mean if you want to send an email to your friend you need his email Id right? Similarly to send or receive money through bitcoins you need a bitcoin address. That address will be generated by the bitcoin wallet software.

How Bitcoin works?

Once you generate a bitcoin address, bitcoin wallet software will generate a secret key.

So when you want to transfer bitcoin to your friend you need to provide your friend bitcoin address and the number of bitcoins you want to transfer to your friend. Once you hit send it will take your bitcoin address, your friend’s bitcoin address & secret key and then it will convert into the signature.

This signature is needed for completing your transaction. Then afterward your transaction is broadcasted into the network. Your transaction is recorded by a blockchain, also known as the public ledger.

The computers in the network will update the blockchain saying that sender transaction completed & pending on the receiver side to receive bitcoin. This blockchain is updated every 10 minutes.

The process of updating and validating a transaction is called Bitcoin mining. You can learn more about bitcoin mining here.

That’s it your friend will receive your bitcoins. It’s very fast & easy to send bitcoin to anyone in the world.

No one knows that you have sent money to your friend. But a transaction is recorded in the blockchain with your bitcoin address. But you still remain anonymous.

Currently 1 Bitcoin = 145934.13 Indian Rupee (as on May 23, 2017).

So if you want to add 1 Bitcoin to your bitcoin wallet you need to add 145934.13 rupees.

It doesn’t mean you need to add 1 Bitcoin to your bitcoin wallet. You can even add 0.0001 bitcoin.

How to add Bitcoin to your Bitcoin wallet?

You can ask your friends to send money to your bitcoin wallet if they hold any bitcoins in their wallet and you can give hard cash in return. There are some sites which allow converting your currency available in your bank account to bitcoins.

Download bitcoin wallet here:

  1. Bitcoin Core (Download) – Supports – Windows, Linux, Mac).
  2. GreenAddress (Download) – Supports – Android app.
  3. Electrum (Download) – Supports – Android app.

Find more apps here.

Advantages of Bitcoin

  1. It is very fast & secure.
  2. You can privately send money to anyone.
  3. Transaction fees are very less.
  4. People can’t steal your information from merchants.
  5. It’s easy to set up.

Disadvantages of Bitcoin

  1. Bitcoin is still not accepted as a currency.
  2. Once you send money to bitcoin address you can’t stop the transaction.
  3. Once you lost your secret key it’s impossible to get your account back and all bitcoins you have in your wallet are lost.
  4. In some countries, it is illegal to use bitcoins.

In some countries, bitcoin is not accepted because it indirectly allows converting your black money to white. And also it paves a path for terrorists to get funds anonymously.

And recently you heard about ransomware(wannaCry) attack. They asked users to pay using bitcoins. It’s because you can’t trace the hacker. Because bitcoin provides you that level of anonymity.

That’s about bitcoin. Hope you understood what is a bitcoin? In my next article, I will explain how to trade with bitcoins? And how to earn Bitcoins? Keep visiting.

Thanks for reading.

Let me know if you need any info regarding bitcoins in the comment section.


  1. It was a really nice piece of information. Just wanted to know that do Bitcoins’ value also change wrt INR just like Dollar and Yen? If yes, how does it relate to it?

    • Yes, Bitcoin’s value will also be changed. How currency(INR, Dollar) is traded similarly Bitcoin is also traded. But Bitcoin doesn’t have any official exchange as we have trade exchanges like NSE, BSE. I will explain you more about bitcoin trading & how it’s currency value changes in my next article. It will clear all your doubts. Thank you.

    • Bitcoin mining means when ever a transaction is done your transaction details are validated and updated in the blockchain. This process of updating and validating a transaction is called Bitcoin mining.


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