What is Bitcoin, How Is It Different?

What is Bitcoin, How Is It Different?

Bitcoin is a virtual currency. It doesn't exist in physical form like the coin we used to be. It doesn't even exist in physical form like Monopoly money. That's an electron - not a molecule.

But consider how much cash you handle personally. You get the salary that you take to the bank - or it's autodeposit without you even seeing paper that isn't printed. You then use a debit card (or checkbook, if you are old school) to access the funds. At best, you see 10% of that in the form of cash in your pocket or in your wallet. So, it turns out that 90% of the funds you manage are virtual - electrons in a spreadsheet or database.

But wait - they are US funds (or they are from any country you come from), safe at the bank and guaranteed by full FDIC confidence up to around% 24250K per account, right? Yeah, not really. Your financial institution may only be asked to save 10% of its deposits on deposits. In some cases, fewer. This lends the rest of your money to other people for up to 30 years. This burdens them for loans, and charges you for the privilege of letting them lend it.

How do you make money?

Your bank earns money by lending it.

Let's say you deposit% 241,000 with your bank. They then lent the 24900%. Suddenly you have 241,000% and others have% 24900. Miraculously, there are% 241900 floating where previously there were only big ones.

Now say your bank is even lending you 900 dollars to another bank. The bank lent 24810% to another bank, which then lent% 24720 to customers. Poof! % 243,430 in an instant - almost% 242500 was created out of nothing - as long as the bank follows the rules of your government central bank.

The creation of Bitcoin is different from making bank funds because cash comes from electrons. It is not controlled by government central banks, but by the consensus of users and nodes. This was not created by mint limited in a building, but by distributed open source and computing software. And that requires a real form of work for creation. More about that soon.


The first BitCoin was in block 50 ("Genesis Block") created by Satoshi Nakomoto in January 2009. Initially it had no value at all. It was only a toy cryptographer based on a paper published two months earlier by Nakomoto. Nakotmoto is a name that seems fictitious - no one knows who he is or he is.

Who tracks everything?

After Genesis Block was created, BitCoins has since been produced by doing the work of tracking all transactions for all Bitcoin as a kind of general ledger. Knots / computers that do calculations on ledgers are rewarded for doing so. For each successful calculation set, the node is valued with a certain number of BitCoin ("BTC"), which is then generated into the BitCoin ecosystem. Therefore the term, "BitCoin Miner" - is because the process creates a new BTC. When BTC supply increases, and as the number of transactions increases, the work needed to renew the public ledger becomes increasingly difficult and complex. As a result, the number of new BTCs in the system is designed to be around 50 BTC (one block) every 10 minutes, worldwide.

Although the computing power for mining Bitcoin (and for updating public ledgers) is currently increasing exponentially, so is the complexity of mathematical problems (which, incidentally, also require a number of guesses), or "proof" needed to mine BitCoin and complete transactional books on certain moment. So the system still only produces one block of 50 BTC every 10 minutes, or 2106 blocks every 2 weeks.

So, in a sense, everyone keeps track of it - that is, all nodes on the network track the history of each BitCoin.

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There is a maximum number of BitCoin that can be produced, and that number is 21 million. According to Khan Academy, the figure is expected to reach around the year 2140.

Until, this morning there were 12.1 million BTC in circulation

Your Bitcoin is stored in a file (your Bitcoin wallet) on your own storage - your computer. The file itself is proof of the amount of BTC you have, and it can move with you on a mobile device.

If the file with a cryptographic key in your wallet is lost, so is your supply of Bitcoin Coins. And you can't get it back.

How much is the value?

Values ​​vary based on how many people think it's feasible - like in exchange for "real money". But because there is no central authority that tries to keep the value around a certain level, it can vary more dynamically. The first BTC was basically worthless at the time, but BTC was still there is. At 11AM on 11 December 2013, the public value was% 24906.00 US per BitCoin. When I finish writing this sentence, it is% 24900.00. Around the beginning of 2013, the value was around% 2420.00 US. On November 27, 2013, this value was more than US $ 241,000.00 per BTC. So it's rather volatile at the moment, but is expected to settle down.

The total value of all BitCoin - in the period at the end of this sentence - is around 11 billion US dollars.

How can I get me?

First, you must have a BitCoin wallet. This article has a link to get it.

Then one way is to buy some from other private parties, like these people on Bloomberg TV. One way is to buy some on an exchange, such as Mt. Gox.

And finally, one way is to dedicate a lot of computer and electrical power to the process and become a BitCoin miner. That is far beyond the scope of this article. But if you have a few thousand extra dollars, you can get quite a lot.

How can I spend it?

There are hundreds of traders of all sizes who take Bitcoin payments, from cafes to car dealers. There is even a Bitcoin ATM in Vancouver, British Columbia to turn your BTC into cash in Vancouver, BC.

Etc?

Money has a long history - millennia in length. A rather recent legend tells us that Manhattan Island was bought for wampum - like shells. In the early years of the United States, different banks printed their own currencies. On my last visit to Salt Spring Island in British Columbia, I spent the only good currency on a beautiful island. A common theme between these is the mutual trust agreement among its users that the value of the currency has a certain value. Sometimes that value is tied directly to something solid and physical, like gold. In 1900 the US tied its currency directly to gold (the "Gold Standard") and in 1971, ended the bond.

Now currencies are traded like other commodities, even though the value of a particular country's currency can be supported or reduced through the actions of their central bank. Bitcoin is an alternative currency that is also traded and its value, like other commodities, is determined by trade, but is not suspended or reduced by any bank action, but directly by the actions of its users. The supply is limited and known, and (unlike the physical currency) as well as the history of each BitCoin. The perceived value, like all other currencies, is based on its usefulness and trust.

As a form of currency, Bitcoin is nothing new in Creation, but this is definitely a new way to make money.

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