What is Bitcoin?

What is Bitcoin
What is Bitcoin

Where Bitcoin Started, and what it Bitcoin.

Bitcoin is a digital currency, otherwise known as a crypto-currency. It was founded in 2008 by a person or group of people using the name Satoshi Nakamoto. The elusive developers of the digital currency are still unknown. Rumors have circulated for years, but no substantial proof has ever been provided on the who the creator is.

Digital currencies like Bitcoin differ from traditional currencies. Transactions are processed without the need for a central banking system. Bitcoin is not only free from bank and debit fees but also partially anonymous. The main advantage of Bitcoin is it can be everywhere and nowhere, in every currency as a transport medium around the planet at the speed of light.

Why Bitcoin? what are the applications and uses?

Part of the attraction with crypto-currencies is that they are created and stored electronically in almost real-time. There is no central ownership of the information, and no central authority controlling them (Bitcoin is more like a dysfunctional democracy at times, votes on the direction of the software can be complicated to explain all on its own). This stored value in the form of information can cross borders with ease and can be accessed and transferred instantly. Bitcoin is not only a currency (store of value) but a storage method of information (storage of valued information). The storage and transport of information around the globe is what the real value and application of blockchain technology is. Bitcoin is not only a currency but a global information exchange with privacy.

With Bitcoin or other blockchain technology in place, you can verify identity and property records, settle insurance contracts and transfer records all on the back of a secured distributed network for a very small fee. The fee is included in the software and is known as a transaction fee, paid to the miner that solves the block.

The speed and security around the Bitcoin blockchain make Bitcoin a logical information transport solution for the future. The future of the technology is almost unlimited as a unified data transport and verification application. This all sounds really fancy, but allowing transaction data to flow around the world freely will power the next generation of technology. I believe in 20 years Bitcoin (or some version of Bitcoin) will be the same as saying (I Googled it).

Where does Bitcoin come from, or how is Bitcoin created?
Peer to peer networking
Peer to peer networking

Bitcoins are produced on a worldwide computer network of peer-to-peer machines sharing data in almost real-time. This means no currency ever needs to be physically printed. Specialized block chain mining hardware and networking software are used to solve complex mathematical problems; the solutions to these problems provide the foundation and backbone of the block chain and the theory of proof of work. The basis of the block chain is the storage systems and public ledger for transactions and more important public information with privacy.

This is a complex process called Bitcoin mining and this goes into a complex explanation that I will sum up neatly. Proof of work is a proof of value. To verify transactions, you have to put in a certain amount of work (Bitcoin mining difficulty) that requires a certain amount of physical energy to complete. There is no way to short cut this method as it is based on mathematical formulas that are universal in application.

How are Bitcoins stored, where are they? Are the Bitcoin secure?

Each Bitcoin transaction is stored in a database called a block chain. There are multiple block chains, independent and existing on multiple systems now called Altcoins, or simply alternative blockchains.  Allowing holders of the currency to stay informed on whom owns what, providing an almost real-time public ledger system. Details of each transaction are placed in a block of transactions, which once verified are stored in the blockchain.

Specialized Bitcoin mining hardware provides the power to verify these blocks. Keeping the ledger from being altered or coins from being spent multiple times. Bitcoin is extremely secure, the transactions and coins are unhackable. This leads to one of the largest risks to a person that owns Bitcoin, is losing control of the key or password to unlock them. Without this key, the coins are lost to everyone forever, so make sure to keep a backup secured! Once again, Bitcoin is beyond a currency and it a digital information system that happens to also be used as a currency in some situations.

Advantages over fiat currency.

Bitcoin and other crypto-currencies are unique, given they are removed from government control. Traditional fiat money systems are controlled solely by banks and government agencies. They are open to inflation or devaluation, given that traditional money can be printed multiple times. No such thing can realistically happen with Bitcoin, giving the currency some security advantages over those who own traditional money investments. Bitcoin was created with a hard number of 21 million coins to be eventually be used or spent (perspective on the term used is key to this concept). 21 million does not sound like enough coins until you start increasing the value in the underlying trade currency. When the Bitcoin exchange rate was $10 USD, the market cap was a theoretical maximum of (21×10) or $210 million US. Increasing the value of the coin or decreasing the amount needed to complete a transaction, the exchange rate naturally changes in a free market supply and demand environment. Instead of 10 Bitcoin being needed to buy an item, 1 Bitcoin is needed and this allows the market to dictate rates freely. (I am a strong advocate for free market currency)

Where can they be spent?

Bitcoins are now being accepted in retail outlets along established currencies like the euro and dollar. Bitcoin is no longer just a currency used for video games and web hosting. It’s taken by Overstock.com, Dell.com, hotel and travel sites; many more added every day. Digital currencies have the potential to transform the world, one bit at a time, moving information without borders.

Bitcoin mining