The name ‘bitcoins’ is derived from the mathematical term ‘blockchain’. Basically, in order for a transaction to be complete, the system of blocks is created and every transaction is recorded in the block, hence the name ‘blockchain’. In the case of bitcoins, this system is used to identify every transaction that has been made and every address associated with that transaction. This way, anyone who wishes to send money to someone else can do so seamlessly and quickly without any need to go through a traditional financial institution or payment gateway. While some people may view this as a threat to the financial power brokers, it is a method which enables users to transact securely and safely without the need of a bank account or money transfer agency.
So what is so unique about bitcoins? To start off, all transactions are made under the form of digital signatures. Transactions are only made when a user inputs a specific digital key into the ‘blockchain’. Once the key is provided, this is compared with a set of previous keys which have been stored by the software in the form of a chain. When a match is found, then the transaction is completed and the money from the account of the user is transferred to the new address which is associated with that key. Thus, every transaction in the bitcoin system is cryptographically secured, meaning that even if two people both have computers that are programmed to perform the same transaction, there will be no way for either computer to reveal any information which would allow them to distinguish between the transactions.
Furthermore, since the bitcoin system operates using a peer-to-peel network, transactions are verified by a network of other users before being able to be entered into the blockchain. As transactions are conducted through this process, the miners play an important role in keeping the ledger continuously up to date, ensuring that the protocol continues to operate properly and does not encounter any problems. Lastly, it must be noted that the major source of electricity for the bitcoin system comes from a network of globalized routers which link together millions of individual computers. This provides a secure way of transferring money without needing to rely on trust-based networks.