How Does Wallet Work With Your bitcoins?
Many may not know much about bitcoins. However, it has already been widely popularized and the buzz in the financial world seems to have boosted its value. Its basically a digital currency that works like any other currency around – you buy it from someone and give them back the equivalent in terms of currency when you are satisfied with their trade. But unlike conventional currencies, you never have to exchange your actual money for the equivalent in bitcoins. Instead, when you are satisfied with a trade, you give back the equivalent in bits and your transaction is completed.
To understand how this works, you have to know what happens when you do a transaction. Transactions happen on a network called the block chain – here, all transactions are recorded in the same manner and on a certain schedule. Transactions go one of two ways: one involves a user sending a transaction to another user; or two involves a user creating a transaction in which they transfer funds to someone else. Transactions are commonly between two users or one user and one merchant or seller and another.
Transactions occur because of two reasons: the users create them by selecting a particular schedule or ‘blockchain’ or someone sends an already-existing transaction. Once a transaction is created, the procedure is simple: either the recipient of the funds or the sender of the funds broadcasts the transaction to the network. If the network receives the transaction, then it takes the necessary time to find all the relevant parties that could potentially take part in the transaction (commission agents and miner’s pool) and if it finds any that match your criteria, it searches the entire network for matching participants. After finding those participants, it gives you the opportunity to create your transaction.
Transactions work on two levels. On the first level is the payment system. This is the most familiar transaction that takes place between a buyer and a seller. On the second level is the mining of the currency that underpins the bitcoins. By developing a payment system that makes it easy for anyone to engage in everyday buy and sell activities, early adopters believe that bitcoins have the ability to replace traditional currencies.
With the right payment system, the power to influence buyers and sellers can be transferred to you. Early adopters of bitcoins believe that the power to influence is directly proportional to how much computing power you put into the system. For instance, if you have ten thousand bitcoins and you start sending five hundred dollars’ worth of transactions every hour, then you will begin to influence people to buy bitcoins, even if they would have never done so before without your influence. So how does this make sense? It makes sense if you think about the fact that people who have ten thousand bitcoins that they would never spend unless they were told to do so by a trusted authority.
Another aspect of the payment system is the wallet. The wallet is responsible for storing all of your private information including your private key. Without your private key, there can be no transaction because you cannot spend them. In order to spend your bitcoins, you must have your wallet account.