In the past few years you’ve probably heard the term bitcoin tossed around, which is hard to grasp for most who are unfamiliar with non-tangible currency. So here’s the rundown on everything you need to know in order to understand the world of digital currency.
Bitcoin is a payment system as well as a digital asset invented by someone who operates under the name “Satoshi Nakamoto”, which was released in 2009.
Bitcoin is whats known as a P2P (peer to peer) system which essentially means that you can send bitcoin from your computer, tablet, smart phone or other device, to anyone, anywhere in the world, day and night.
What truly differs bitcoin from US currency is that the system is able to work without anyone in charge of it, and without a central repository. Which is what leads us to define it as decentralized virtual currency. It is completely open source.
What makes it safe is that it uses crypto currency, which is a medium of exchange using “secret code” to secure the transactions and the creation of new units.
How does one get a Bitcoin? You can exchange goods or services in return for some, or more interestingly Bitcoins are created as a result and reward of processing work in which volunteers offer their computers computing power to verify and record payments into a public ledger. This is known as mining, and miners are then rewarded with newly created bitcoins. This transaction fee is optional for users to send and receive bitcoins, and allows them to speed up transaction processing.
The price of a bitcoin is ever changing, and as I currently write this post one bitcoin is the equivalent of 419.06 US dollars. If this seems high its value reached an all time high of $1216 in late 2013.
So how does it all work? Behind the scenes, the Bitcoin network is sharing a massive public ledger called the “block chain”. This ledger contains every transaction ever processed which enables a user’s computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses therefore allowing all users to have full control over sending bitcoins.
Still interested? Check out these old posts tackling some interesting topics surrounding bitcoins.