Simple Description of Digital Currencies
If we want to describe a digital currency such as Bitcoin with the current structure of money and the banking system, we can say:
Bitcoin wallet is equivalent to your bank account. A digital currency wallet is a piece of software that can be installed on a mobile phone or computer.
Bitcoin address is equivalent to your bank account number or card number. You get the bitcoin address from the wallet.
Blockchain is the equivalent of a banking system in which transactions are maintained and managed. Blockchain can be considered a large database.
With this account, to send bitcoins, you have to open your wallet, enter the sending section, enter the other party’s bitcoin address in the recipient field, enter the number and click send, just like that!
To receive bitcoins, you need to open your wallet, log in, receive the bitcoin address and give it to the person or website that intends to send you bitcoins.
In the banking system, the work of processing transactions, maintaining balance and all related tasks is done by the banking system and the central bank.
But Bitcoin does not have such a system. Bitcoin is like an autonomous system. The Bitcoin network includes thousands of computers and miners scattered around the world. Transaction approval and inventory updates are done by this system.
In the Bitcoin network, all computers connected to the network have a copy of the data (Bitcoin blockchain).
When a bitcoin transaction is sent to the network and approved by the miners, the transaction is stored in the blockchain and remains unchanged.
Therefore, blockchain can be considered as a database that is stored in thousands of devices around the world, and in order to make a change in this database, all computers connected to the network must approve it.
This extraordinary structure has created a system that does not require a bank or central institution for processing and supervision.
Bitcoin has been created since 2009 by an unknown individual or group whose true identity is still unknown.
This definition was the simplest description of how bitcoin and blockchain work, but there are some very detailed and technical details that you can read in other sections.