Bitcoin or the cryptocurrencies are rapidly becoming a popular buzzword nowadays. Everyone heard about folks that are millionaires in bits. But what is the bitcoin?
An interesting article from NY Times “What Is Bitcoin, and How Does It Work?” gives us some useful explanations:
A Bitcoin is a digital token — with no physical backing — that can be sent electronically from one user to another, anywhere in the world. A Bitcoin can be divided out to eight decimal places, so you can send someone 0.00000001 Bitcoins. This smallest fraction of a Bitcoin — the penny of the Bitcoin world — is referred to as a Satoshi, after the anonymous creator of Bitcoin.
Unlike traditional payment networks like Visa, the Bitcoin network is not run by a single company or person. The system is run by a decentralized network of computers around the world that keep track of all Bitcoin transactions, similar to the way Wikipedia is maintained by a decentralized network of writers and editors.
The record of all Bitcoin transactions that these computers are constantly updating is known as the blockchain.
Why do criminals like Bitcoin?
Criminals have taken to Bitcoin because anyone can open a Bitcoin address and start sending and receiving Bitcoins without giving a name or identity. There is no central authority that could collect this information.
Why won’t the government just shut it down?
The records of the Bitcoin network, including all balances and transactions, are stored on every computer helping to maintain the network — about 9,500 computers in late 2017.
If the government made it illegal for Americans to participate in this network, the computers and people keeping the records in other countries would still be able to continue. The decentralized nature of Bitcoin is also one of the qualities that have made it popular with people who are suspicious of government authorities.
Are there legal uses?
Only a small percentage of all transactions on the Bitcoin network are explicitly illegal. Most transactions are people buying and selling Bitcoins on exchanges, speculating on future prices. People in countries with high inflation, like Argentina and Venezuela, have bought Bitcoin with their local currency to avoid losing their savings to inflation.
One of the most popular business plans is to use Bitcoin to move money over international borders. Large international money transfers can take weeks when they go through banks, while millions of dollars of Bitcoin can be moved in minutes.
What is Bitcoin mining?
Bitcoin mining refers to the process through which new Bitcoins are created and given to computers helping to maintain the network. The computers involved in Bitcoin mining are in a sort of computational race to process new transactions coming onto the network. The winner — generally the person with the fastest computers — gets a chunk of new Bitcoins. (The reward is halved every four years.)
Are there Bitcoin competitors?
Plenty. But these other virtual currencies do not have as many followers as Bitcoin, so they are not worth as much. As in the real world, a currency is worth only as much as the number of people willing to accept it for goods and services.
Who is Satoshi Nakamoto?
Bitcoin was introduced in 2008 by an unknown creator going by the name of Satoshi Nakamoto, who communicated only by email and social messaging. Satoshi created the original rules of the Bitcoin network and then released the software to the world in 2009. Satoshi largely disappeared from view two years later. Anyone can download and use the software, and Satoshi now has no more control over the network than anyone else using the software.
Introduction to Bitcoin, by Andreas M. Antonopoulos
How bitcoin is distributed at this moment?
Is bitcoin a bubble?
Is the the greater fool theory applicable here: people are buying bitcoin because they expect other people to buy it from them at a higher price?!
The Economist claims that the crash might not be too far away. This is how bitcoin price has evolved over time.