An Overview of Bitcoin Concepts
An Overview of Bitcoin Concepts . To understand how Bitcoin works, please note first that Bitcoin is a digital currency. In the Bitcoin system, it is decentralized using peer-to-peer(P2P) technology. With this peer-to-peer technology, bitcoin transactions are made instantly, thus requiring no central authority or without through a financial institution.
In addition, all transaction processing in Bitcoin will be verified collectively in the Bitcoin network. Differences with conventional currency, conventional currency issued by the central bank as a manager of national monetary policy. While Bitcoin, can be obtained independently by everyone, can by mining Bitcoin, or by buying Bitcoin.
Bitcoin, using peer-to-peer technology. That is, there is no central control or a particular server in the Bitcoin network. All Bitcoin users, will be directly connected to each other in the Bitcoin network.
In the interconnected network, there is a database of all Bitcoin transaction records. All Bitcoin users, can access the recording of Bitcoin transactions. The Bitcoin transaction record database, called “Blockchain” or “Block Chain”, is interconnected with each other.
Furthermore, the Bitcoin Block Chain is what connects all Bitcoin users. That’s why, in Bitcoin there is not a dedicated server that serves as the bridgehead. Bitcoin users, can have a copy or copy this database file on their respective computers. BlockChain or chain block, contains all data transactions Bitcoin users in the world. While in a Block, can contain one or more transactions that occur.
3. Utilization of Cryptography Technique
Cryptography, is a branch of science that studies the technique of concealment of confidential information, its function that the message is not known by a third party.Generally, the process of concealment of the message through the process of encryption by randomizing the message, and then, the party fixed in the message will do the decryption process to be able to open the information.
Using this cryptographic technique, Bitcoin can become a digital payment system, which is done online in a peer-to-peer network system. Bitcoin, uses some of these cryptographic techniques in its system. Ie public key infrastructure, digital signature, and also hash algorithm.
- Public Key Infrastructure
In the branch of Cryptography, Public Key Infrastructure is generally a way to provide authentication, by securing data through a device that is difficult to manipulate. While in its use, Public Key Infrastructure consists of public key, and also private key. In Bitcoin system, Public key functions as Address (public address), and private key functions like a PIN in Bank account. Thus, the private key is confidential, and is known only to the owner of the bitcoin address.
- Digital Signature
Literally, Digital Signature is a digital signature. This digital signature, inside Bitcoin serves as an important verification of the Bitcoin protocol. A digital signature originating from the private key owner, will be able to prove the validity of the transaction.
- Hash Function
In computer terms, hash functions as an algorithm that converts text into a random sequence of characters and has the same number of characters. While in Bitcoin, hash / hashing is a complex result of mathematical calculations that are easy to reproduce but quite difficult to repeat, and also difficult to predict. So the process of a hashing is a pure mathematical process.
4. Proof of Work
Proof of Work, is a system that binds computing power in the Bitcoin mining process. Block must be done with hashing process. Meanwhile, the hash itself is an easier computing process. However, there are added variables that make the hashing process even more difficult. When the block succeeds in the hash, it may take some time for the additional computing effort. After that, the block is considered to meet the proof of work, and the miners will get rewards for the success of mining Bitcoin .
The Proof of Work system is a necessary concept to prove the truth, and the validity of the transaction. The process of validating Bitcoin transactions, not only in the ongoing transactions, but also on the previous transactions. Because the Block Chain character is giving each other validity based on previous transactions.
On any Bitcoin user already connected in the Bitcoin network, it will sync continuously. This process, supported by the miners Bitcoin enough support in maintaining the validity of Bitcoin transactions.
That is a brief overview of the concept of Bitcoin.