When you hear the term « bitcoins,» you may immediately think of the virtual currency found on many online message boards. While bitcoins are definitely one type of virtual currency, you should not always think of it as being synonymous with that. Before we go any further, let's talk about how this «virtual currency» works. And by the end of this article, you will understand why many people are investing in this exciting technology.
Unlike traditional money, bitcoins are a digital currency that exists only as long as the bitcoin network exists. It doesn't exist in a tangible form, like a gold coin or silver dollars. Instead, it exists as part of a distributed ledger system called the bitcoin network. This system is an online collection of globally synchronized ledgers, or ledgers.
Secure and Anonymous
The bitcoin protocol is designed so that every transaction is guaranteed to be secure and anonymous. Transactions made on the bitcoin network are recorded in a public ledger known as the «blockchain». The blocks of transactions are kept in a digital format called the bitcoin protocol hash. Transactions are listed in the chronological order they happened, starting with the latest block. Transactions are cryptographically signed using a public key which is only accessible to the owner of the bitcoin private key.
The beauty of the bitcoin system is that anyone can participate in the chain. Transactions can be sent to any other bitcoin user that has a public key that is valid. As long as these users agree to the terms of the chain, they can together mine bitcoin and spend their earnings however they see fit. Since these transactions are completely encrypted, there is no fear of being hacked or robbed, thus there is no way for an unauthorized party to take control of your private keys or spend your money without your consent.
Risks of Bitcoin System
However, despite the fact that you have complete control over the transactions and how they happen, there is still a chance that something could go wrong with the bitcoin system. For instance, if a hacker steals your computer or software that makes use of the bitcoin protocol, he could reverse engineer your transactions and figure out what you are spending and why. He could then start sending his own unspent bitcoins to your address. If you don't have an encrypted public ledger, he could simply create one for himself.
To prevent this from happening, you need to keep your bitcoins safe from prying eyes. You do this by having a separate address for your private wallet and your public wallet. Your private wallet should only be used for private matters. Only you can access your private wallet and spend your bitcoins. Only you can send your bitcoins to anybody else.
This is the reason why you should not store your bitcoins on a shared computer or a laptop. These places are highly susceptible to hackers' attacks since they are often left open. Your private wallet is completely safe and you can ensure that nobody is reading your private data. A virtual private server is the most secure way to safeguard your bitcoins. It is the most recommended way to use the bitcoin protocol.
The entire process is extremely safe and secure since the bitcoin network works without relying on a third party. With the absence of third parties, it becomes extremely difficult for anyone to tamper with or manipulate the system since every transaction is broadcast to the entire network. With the help of a reliable virtual private server, you can ensure that nobody can interrupt your bitcoins transactions.
