Bitcoin’s appearance has revolutionized payment aspect by eliminating focused system and complicated intermediary’s necessity. To illustrate this issue let’s make a comparison between traditional focused system and Bitcoin.
Traditional commerce channels carried out payments through intermediary’s help ( commercial organizations with a particular role and reliability).
So, what are its functions?
- Transactions can reverse
- Intermediaries set up a percentage which raises the transactions’ fee and put a minimum price. This makes small and irregular’s transactions3. Transactions’ reversible characteristic increase the fee of uncancelled services ( that transaction was canceled, however, we paid a percentage for it).
- It is necessary to require the customer’s information more because payments can be canceled, the seller inherits insurance.
- A fraudulent rate is an unavoidable thing.
But, what about a payment system which allows 2 people to transfer money directly without an intermediary?
Fraud will be disadvantaged because of unsuccessful transaction’s fees and the customer will be protected by the insurance. That’s exactly what Bitcoin based on blockchain technology.
How does it activate?
Information was taken note in blocks. If a block is full, a new block will appear. Blocks are linked logically, the following block contained the previous block’s information ( hash). Therefore, you can re-examine the first block’s information if you want.
Encoding money is defined as a digital signatures sequence. For example, A sent money to B then signed the previous hash code as well as the public key of B. After that, A enclosed this information into coin. But how to determine the installment that the A person consumed? B person didn’t know any owner in the transaction.
For this, a time stamp was taken in block hash. It shows that a specific data has existed at that moment, then it will be saved in the block hash. So the first transaction is the only valid one. You don’t need to worry about double spending situation. The first transaction’s information has note-taken for all participants, the next inexact transaction will be refused.
Inside the system, a transaction consists of:
– Input: A person’s information and details
– Money: the amount of transferred money
– Output: B person’s wallet address
Input and Output.
As you know, Bitcoin existed as a transacting file in the electronic archive. Different transactions were carried out at different time.