What is a Digital Copy?
Digital copy used in cryptocurrency implies a duplicate record of each confirmed transaction that has been executed over a peer-to-peer network like the Bitcoin network. A digital copy can be defined as a security feature of the Bitcoin protocol that helps to tackle the double-spending problem.Working of Digital Copy
The rise in cryptocurrencies started from the year 2009 when Bitcoin was introduced. One of the major reasons why Bitcoin was created is the desire for a digital currency that cannot be controlled by any central or regulatory authority, or that need not require a third party to guarantee the transactions. When compared with bank transactions, these digital transactions do not have any database or central record of verified Bitcoin transactions; rather Bitcoins are operated through a decentralized network of several computers, where each one of them retains a record of the confirmed transactions. This type of distributed ledger technology is called the blockchain.Double-Spending
- Transactions in digital currencies are done through a decentralized system that comes with the problem of double-spending. Double spending occurs when the user tries to send the same crypto coin to two various addresses.
- In the traditional currency system, the double-spending problem is prevented by financial institutions like clearinghouses, banks, and online payment systems that check the account balances and the transaction history. The older digital currency framework like ecash did not help in preventing double-spending and it is not successful.
- To solve this problem the person who created the Bitcoin, Satoshi Nakamoto, developed a process where every legitimate transaction is shared and verified by several miners distributed over the network.
Blockchain and Digital Copies
- Every transaction carried out on the Bitcoin network is presented to every miner that assembles several transactions in a block. When a block is completed, the miner broadcasts the transaction to numerous other nodes, each of them compared to the new transactions of their digital copy on the blockchain.
- If any double-spending is detected by any node, the block is rejected. Simply put, the nodes will inform the new block, other nodes, and miners. This effectively prevents the double-spending problem by rewarding and punishing the malicious actors.
- As the minors are offered block rewards, they have a financial interest in accommodating the transactions that are only legitimate. If the miners do not blacklist double-spend problems, the block will be shared by nodes.
Key Takeaway of Bitcoin
- Bitcoin was the first digital currency that was created for people to transfer money using the internet. It was intended to offer an alternative payment system that can operate without any intervention from the central authority and can be used like traditional currencies.
- There are several best cryptocurrency exchange or bitcoin exchange in India where people can buy bitcoin either as a whole or a fraction of a coin. People can invest through crypto exchange and take advantage of the market volatility to earn profits.
- Bitcoin operates without any intervention from any Central authority; due to this, making an error in the executed transaction cannot be undone. If the user accidentally sends Bitcoin to the wrong address or they lose a password nothing can be undone.
Bitcoin is one of the most popular and first cryptocurrencies that started its journey in 2009. Currently, there are over 10,000 cryptocurrencies in existence. Recently, this cryptocurrency sector has crossed more than $1 trillion by market cap. People can use cryptocurrencies to buy and sell goods or services. Several people have started accepting it and it is used as a store of value. Cryptocurrencies are not controlled or regulated by the government, or central authority, hence anybody can invest in cryptocurrencies and reap benefits.