Ownership of Bitcoin and transactions
No physical Bitcoins:
With ownership of Bitcoin and other cryptocurrencies, you technically don’t own anything physical. You can’t go to Coinbase, Airbitz, Kraken, Bittrex or any other exchange/wallet service and ask to withdraw cold hard Bitcoin. You can’t even go to a physical Bitcoin ATM and withdraw Bitcoins. Meaning you don’t really own anything. (Interested in buying bitcoin?)
You only own the Bitcoin wallet address and you gain Bitcoins by having them transferred into your wallet address.
Since Bitcoins are a currency what most people want to do with currency, is spend it for physical products/services. But if you don’t own anything real then how do transactions work?
Value and transactions:
Bitcoins are given value by the free market, through speculation and perceived value people value Bitcoins and blockchain technology at about $2700 USD (at time of writing). However, if people lost faith in Bitcoins it could plummet to zero. However, currently one Bitcoin is equal to 2700 worth of US goods. It is through this value that people purchase goods or services with their Bitcoins.
The actual Bitcoin transaction process works by the following process:
- An input. A record of where person A received the Bitcoin from in the first place, through either a pervious exchange or through a mining block reward.
- An amount. The amount of Bitcoins person A is sending to person B
- An output. Person’s B Bitcoin wallet address.
Person A then uses their private key to approve the message with the input, amount, and output. The transaction is then sent to miners to process the block and eventually solving the hash.
After the block is confirmed by the miners the Bitcoin arrives in the other wallet. You can view the transaction history here. However, it might be hard to find the exact block your transaction was processed in, as each block contains 1,000+ transactions.
Waiting for bitcoin:
Your transaction must be verified and processed by miners, so sometimes you are forced to wait until they are finished mining the block with your transaction. The Bitcoin protocol has each block taking roughly ten minutes to mine.
Some companies or people may make you wait until the block has been confirmed before you can get your product or service.
But most companies, if the price is a small amount, don’t make you wait until it’s processed and trust you didn’t try and spend the same Bitcoins elsewhere before the transaction confirms.
Are there transaction fees?
Sometimes there are transaction fees. For a while with Bitcoin miners didn’t collect transaction fees because the block reward was big enough to compensate them fairly for the electricity and time put into solving the hash.
However, as the reward gets halved as time goes on the miners will start wanting more transaction fees and will process the ones which pay them more first. A larger payment to miners will get the transaction confirmed faster than a smaller payment.
However, with Bitcoin cash now resolving some of the issues of limited block space many people might move over to the faster Bitcoin cash system as it will hopefully be cheaper and faster than Bitcoin.
Can I get a receipt?
While Bitcoin wasn’t really meant for receipts there are wallet services and changes that make Bitcoin far more user-friendly. Further there are Bitcoin wallets that give you much more user-friendly things like receipts and order confirmation that aren’t there with a native Bitcoin transaction.
Sending only a part of a bitcoin:
With the value of Bitcoin being so high you probably don’t want to spend the time finding one Item that costs exactly one Bitcoin (might be impossible because it varies every second). But not to worry because Bitcoins are divisible down to the one hundred millionth. It’s possible to send a Bitcoin worth a few dollars to someone as payment for an Uber ride.
Personal Ownership of Bitcoin:
As a summary, Bitcoins aren’t owned by anyone. They are just a record of transactions which have taken place. You can spend the amount of Bitcoins which the ledger says you have in your address, by using your private key to send Bitcoin to another Bitcoin address.
That’s personal ownership of Bitcoins, the currency.
But what about Ownership of Bitcoin itself?
The closest thing you could get to “owning” Bitcoin is owning the Bitcoin protocol and the Blockchain technology, but no one does, as it’s not patented.
The Bitcoin protocol isn’t ran by anyone. It’s decentralized and ran primarily by miners, who mine blocks and mint new coins. Unless mass centralization happens within the mining community, it’s unlikely we could say “Bitcoin is ran by X company.”
The Bitcoin protocol was developed by a unknown person called Satoshi Nakamoto. There are several theories around the community about who he is. Some say he’s a professor, blogger, military specialist turned libertarian, and other theories exist. Currently the only thing we know is that someone under Satoshi Nakamoto pseudonym published a article in The Cryptography Mailing list at metzdowd.com detailing Bitcoin. Perhaps at some point we’ll learn who the creator is but for now, we’ll have to wait. As for who edits the code it’s currently ran by the Bitcoin Foundation and a team of people are behind the development.
Summary:
Bitcoin transactions need three pieces of information:
- Input or a record of where the Bitcoin first came from.
- Amount of Bitcoin to be moved
- The address you are sending Bitcoin to
Personal ownership of Bitcoin:
You don’t really own any Bitcoins, rather the ledger keeps track of the Bitcoins that are in your account and lets you spend or receive Bitcoins using records of past transactions.
Ownership of Bitcoin:
No-one owns the protocol and Bitcoin source code but Bitcoin foundation edits the code and proposes new changes to the source code.
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