Disclaimer: This post does not cover ICOs
Introduction
Before the invention of bitcoin we used to transact using physical money and maybe store these physical money in digital form by using banks like Axis Bank, Swiss Bank, HDFC Bank etc.. which we can use to mae payments using debit cards, credit cards and various other means but then we started having digital wallets like Due, MobiKwik, Paytm and so on which helped us make payments by recharging our wallets using our bank account.
Problem
Now all this was working well but the main issue was we had to rely upon middlemen or basically banks which meant that we had to trust them with our money. This also meant that a fee was charged from the account holder for maintenance and other services. Not only this companies like Paypal acted like agents who would verify the transaction and ensure the solution to the double spending problem. Basically a payment gateway. Now again we would have to trust Paypal.
Why?
Because they will ensure the transaction is successful and now only one party has the money not both.
Didn't make sense?
Well in order to understand what the above means we need to know what is Double Spending problem.
Our current Internet works on the principles of copies which means that almost everything accessible on the internet is a copy of the original. When we download a file it is a copy of the original. Similarly with the transfer of money digitally a copy of it would be sent to the recipient and now both the sender and the receiver would have the money. In order to avoid this we needed middlemen, payment gateways to verify that such a situation does not occur.
What is Blockchain and how is it related to bitcoin? [In short]
Bitcoin is based on a technology that implements a decentralized network. The term you often hear of is 'Blockchain'. This technology uses a peer to peer connection. If you want an example of this kind of connection we can take the ideal example of torrents. Now bitcoin does operate on a decentralized system but also when a user is trying to access any information it is the original information and not a copy being presented to you. If you want to know at a glance what blockchain is I'll link another post at the end.
What is bitcoin?
Bitcoin is just another cryptocurrency.
But it isn't that simple, bitcoin is a cryptocurrency which means that it is a digital currency that does not follow the principles of the way the rest of the digital currencies operated before it. Since it is based on a decentralized network the situation that results is that now bitcoin is a digital currency that can be transferred using crypto wallets like Jaxx, Electrum. The transaction that takes place is verified by people called miners. Who are provided bitcoins for mining and not just this once the transaction is verified it is added to a block which is stored on a decentralized network. The way it solves the double spending problem is that when a bitcoin is transferred from one person to another the original is sent and not a copy of the original.
Who are miners?
Miners are people who verify the transactions using hardware specifically made for this purpose. Some hardware miners are
Antminer, Innosilicon A10 ETHmaster, STRIKER Light Mine Professional etc.
Fun fact: Bitcoins could be mined before using a normal laptop or a CPU which later proved to be insufficient.
How is bitcoin better?
It basically facilitates transparency by ensuring that the transactions are all public and it is like a big open ledger. It has a high degree of security mainly because the network is distributed and no data can be tampered with. If someone does desire to tamper with the data then they would require
51% control of the decentralized network. [It has been proven in the case of bitcoin gold]
In the event of the ownership of 51% of the decentralized network the following are possible
1. Prevention of new transactions
2. Halt payments
3. Reverse transactions
4. Double spend coins
But existing blocks cannot be modified.
Conclusion
Bitcoin seems to be a very reliable and secure means of payments and various other financial transactions. Although it is highly volatile there does seem to be a trend towards its adoption and labeling it as a valid means of financial transactions or payments as even the SEC is now about to provide its verdict in december.
There has been an up rise in cryptocurrencies similar to bitcoin like Bitcoin Gold, Bitcoin Clashic, Bcash, Bitcoin Core etc.
Side Note: A cryptocurrency that is the next version of bitcoin is Ethereum.
But a future where bitcoin is accepted as a means of payment in department stores, automobile showrooms and various other outlets might not be too far away.
Hope this helps
Link: https://www.google.com/url?q=https://bitcointalk.org/index.php?topic%3D5042773.0&sa=D&source=hangouts&ust=1538806722512000&usg=AFQjCNFjNbRtfO1aKU9VlAyEdywwAUTvUw