A Software Based Online Payment System – Bitcoin

Online Payment System involves electronic payment for transactions that are held online. They are widely used by people nowadays for online shopping, online bill payments and for online banking. Usually credit cards and debit cards or internet banking is used for online transactions. Nowadays a new alternative trend called Crypto Currency or Digital Currency is used for payments without any cards. Bitcoin is one of the global payment networks which allow electronic money transfer. This network is not owned by any single administration and it is open source online payment software proposed by Satoshi Nakamoto.

Bitcoin is created and transferred electronically with low transaction fees. Block Chain is the public ledger which records the transactions in bitcoins all over the world and this recording is known as Mining. A peer to peer client maintains this ledger. A group of accepted transactions called blocks are added six times per hour to the block chain. Unlike other online payment gateways which make use of conventional currencies, bitcoin network has its own currencies called bitcoins. Bitcoins are represented in units called satoshi, millibitcoin, microbitcoin. Sathoshi is the least unit which is one hundredth million of a bitcoin. In October 2014, a bitcoin is equal to $400.

English: Chart showing rapid rise and fall in ...

English: Chart showing rapid rise and fall in price of bitcoins. (Photo credit: Wikipedia)

Bitcoin is based on mathematics not on gold or silver. Anyone can produce bitcoins using mathematical formula that is available as open source. Bitcoin transaction is very fast and completely transparent. Every transaction is protected with digital sign of the payer. This private key prevents unauthorised access to the transaction. Loss of bitcoins by means of loss of the private key cannot be recovered. Bitcoin transactions are stored in public ledgers so they can be viewed by anyone. However the owner of the account is not revealed until anyone provides information online. Prime responsibility of account holder is to protect the privacy. Bitcoin is a new currency that is developed recently and it is a new approach that has not been attempted in the past.