E-commerce: Technical Aspects of Bitcoin Revolution
Bitcoin [http://www.investopedia.com/terms/b/bitcoin.asp] cryptocurrency has being used widely around the world for already several years. First of all, let’s accept that it’s both robust technology and mature implementation. It’s going to be more important in our life as new tool coming to substitute old good bank accounts, wires and credit cards. Besides, blockchain [http://www.investopedia.com/terms/b/blockchain.asp] technology, that is an important part of bitcoin system, potentially provides solutions for plenty of problems beyond E-commerce an financial transactions, based on the same general principles as bitcoin — decentralization and privacy.
The main goal of any currency system is to providing ability to exchange or transfer money from one account (or wallet) to another. Bitcoin schema is based on transactions as well. E.g., Alice is going to send 5 BTC to Bob. The transaction in this case consists of 3 main parts:
● Bob as destination of the transaction
● 5 BTC amount of transferred money
● Source of the money where Alice was received it from. E.g., Dale sent Alice 5 BTC.
There is a sort of queue: Dale sent money to Alice, then Alice sent them to Bob. Each transaction has a reference to another transaction as a source. It’s very easy to track whole history of the money up till very beginning. Why it’s important? Because there is no record about a state of account in certain period of time. Accounts and money on them are not saved in traditional E-commerce form of the balances in the databases. Instead, there is a vast distributed ledger for recording all movements. It’s called blockchain or blockchain database. Keep in mind, all such transaction records available for all nodes in bitcoin network. Such system looks absolutely transparent. On the other hand, it’s more private than banks or traditional e-commerce systems, because there is no man-in-the-middle component we should trust. In case of bitcoin, a wallet is just a hash, no names attached.
Blockchain and miners
There is one more very important part of the system — miners. There are special kind of users of the network, or rather to say their computers. The transactions are saved into blocks of distributed blockchain database. The miners received new incoming transactions from the network and compose them into blocks. That process is pretty complicated. There is some kind of competition among miners to find (mine) unused hash for the block. As the hash is found, new block is saved into blockchain and appropriate miner received its fees. Roughly speaking, bitcoin system is alive while Internet exists and the miners continue their work.
Bitcoin system is decentralized. It can’t be hold under control by government or corporation. The whole amount of the money in the system is almost constant. As nobody can print more money, bitcoin is stable at line of inflation. 1 BTC will be always 1 BTC. When one bank is working with check of another bank, it may take a lot of time to confirm, that there are enough money on account to treat the operation valid and provide the secutity of payment. In case of bitcoin, it needs to wait up to 10 minutes for absolute confirmation that the same money was not spent twice.