Is Bitcoin Safe to Use?

Now, whenever you are making payments in the Bitcoin network, it is ensured that no one person can spend the Bitcoin owned by another person, i.e., Sarah won’t be able to spend the Bitcoin owned by Alister, by creating a transaction in his name. Intruders in the network will not be able to create any false transaction.

To ensure this, Bitcoin uses the public key cryptography which uses digital signature concept along with ECDSA (Elliptic Curve Digital Signature Algorithm) digital signature algorithm to make & verify the transactions using digital signatures. Each person in the Bitcoin network has one or more search addresses with an associated pair of a public and private key. This way every user can have one or more address based on their wallet or how many addresses they can create, with every Bitcoin address associated with public and a private key.

Now, say Alister wants to transfer some Bitcoin to Bob. He can do this by signing the transaction using his private key and then send the signature along with the transaction to Bob. Now, anyone in the network can validate this transaction with Alister’s public key. They can decrypt the transaction and verify whether or not its originated from Alister. These are the set of states that Alister has to follow if he wants to transfer certain Bitcoins to Bob.

Bob transfers a cryptographically generated address to Alister. Alister then adds Bob’s address & the amount of Bitcoin that needs to be transferred, in the transaction message. Alister signs the transaction with his private key and announces the public key with which anyone can validate the transaction.

A problem of double spending arises whenever a transaction is made in digital currency, which means that the same bitcoin can be used for more than one transaction. For instance, Alister has a total of 50 bitcoins & has transferred the same to Bob and John, respectively. This transaction is a double spending one; both the transactions cannot be valid simultaneously. In a centralised system like a banking agency, double spending is very easy to validate. But, how to prevent double spending in a decentralised network, so that no one will be able to make two transactions with the same bitcoins (The Creators of Bitcoin and Who Controls It?).

The Blockchain used in Bitcoin can prevent double spending (What is Blockhain Technology?). The details about the transactions sent are forwarded to all the users in the Bitcoin network or as many as other computers as possible. The blockchain continually grows a chain of blocks to contain a record of all past transactions and is maintained by all the peers in the Bitcoin network. All the nodes/ users present in the network, retain a copy of all the transactions in the blockchain with them. Now, to get a transaction accepted for a chain, the transaction blocks need to be validated and should also include the proof of work (What is Proof-of-Work?).

Given the various methods and marketplaces (exchanges) for Bitcoin, the traders have a wide range of option to choose among them. The competition between various exchanges is undoubtedly at peak, which has improved the quality of service and customer benefits a lot. The main notion of the creation of Bitcoin was to solve the existing centralized bodies and the connected trust issue. The Bitcoin blockchain is tamper-proof and the only way to lose out your bitcoins from your wallet is by losing your wallet’s private key. Always keep them super-safe and if using exchanges, go for the most secure, trusted and popular ones!

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