KNOW ABOUT BITCOIN AS A PAYMENT SYSTEM: SOLVING THE DOUBLE SPEND PROBLEM DEFINITION
As a brand new virtual forex, Bitcoin is wonderful, however the sincerely progressive component of Bitcoin is in a new fee gadget. Before I explain this gadget, allow me briefly describe one of the number one reasons why virtual currencies have usually failed within the beyond.
In the bodily global, money can’t be in two locations straight away: after you spend it, it is inner save A’s cash check in and it may’t be in shop B’s cash check in. With virtual foreign money, this isn’t always genuine. Since virtual currency is laptop code, the identical money may want to honestly live in multiple locations. This is obviously a big hassle, and would result in rampant fraud.
However, we do transact large quantities of cash digitally today, so how come we don’t see greater double spending? Well, we’ve services that contend with the hassle, which include PayPal. They review all of the transactions to make certain that the identical money isn’t spent two times.
But there are giant problems with the use of a centralized carrier to deal with the double spend hassle. First, they may be a unmarried point of failure. This means that if PayPal had been to have technical problems – or possibly in the event that they don’t like what you are trying to purchase – then you may’t flow your money at all. Also, you need to pay them for their carrier, commonly with fees that are 2% or even higher.
Bitcoin’s charge machine solves the double spend trouble, does it without relying on a single point of failure, and calls for notably smaller charges. It does this via using a public ledger referred to as the Blockchain, which I’ll talk in more detail later inside the e book.