Bitcoin is a virtual currency. It does not exist in the physical form in which we used to exist currency and coin. It doesn’t even exist in such a physical form as Money Monopoly. These are electrons, not molecules.
But think about how much cash you personally handle. You get a salary that you carry in the bank – or it is automatically paid in without you even seeing the paper on which it is not printed. You then use a debit card (or checkbook if you are old school) to access these funds. At best you see 10% in cash in your pocket or in your pocket. So, it turns out that 90% of the funds you manage are virtual – electrons in a table or database.
But wait – it’s US funds (or from any country you come from), safe in the bank and guaranteed full FDIC faith of up to about $ 250,000 in the account, right? Well, not quite. Your financial institution may require you to keep only 10% of your deposits. In some cases it is less. He lends the rest of your money to other people for up to 30 years. He collects from them a loan and charges you with the privilege of lending them.
How is money created?
Your bank can create money by lending it.
Let’s say you deposit $ 1,000 into your bank. They then lend $ 900. Suddenly you have $ 1,000 and someone else has $ 900. Magically, where previously there was only a grand, $ 1,900.
Now let’s say your bank lends $ 900 of your money to another bank. This bank, in turn, lends $ 810 to another bank, which then lends the customer $ 720. Poof! $ 3,430 in an instant – almost $ 2,500 created from nothing – as long as the bank follows the rules of your government’s central bank.
Creating Bitcoin is just as different from creating bank funds as cash is from electrons. It is controlled not by the central bank of the government, but rather by the consensus of its users and nodes. It was created not by a limited mint in a building, but rather by distributed open source software and computing. And a form of actual work is needed to create. More on that soon.
Who Invented Bitcoin?
The first bitcoins were in the block of 50 (“Block Genesis”), created by Satoshi Nakamata in January 2009. At first it had no value. It was just an encryptor game based on an article published two months earlier by Nakomoto. Nakotmot is a clearly fictional name – no one seems to know who he or she is.
Who keeps track of everything?
Once the Genesis unit was created, bitcoins have since been created, doing the job of tracking all transactions for all bitcoins as a kind of public book. Nodes / computers that perform calculations in the book are rewarded for this. For each set of successful settlements, the node is rewarded with a certain number of bitcoins (“BTC”), which are then re-generated in the bitcoin ecosystem. Hence the term “Bitcoin Miner” – because the process creates new BTC. As the supply of BTC increases and the number of transactions increases, the work required to update the public ledger becomes more and more complex. As a result, the number of new BTCs in the system should be about 50 BTCs (one unit) every 10 minutes worldwide.
Although the computing power for bitcoin mining (and for updating the public book) is now growing exponentially, so is the complexity of the math problem (which, incidentally, also requires a certain amount of guesswork), or proof ”needed for BitCoin mining and for transaction book settlements at any time. Therefore, the system still generates only one 50 BTC block every 10 minutes or 2106 blocks every 2 weeks.
So, in a sense, everyone is tracking it – that is, all network nodes are tracking the history of each individual bitcoin.
How much is there and where?
There is a maximum number of bitcoins that can ever be generated, and that number is 21 million. According to the Khan Academy, the number is expected to peak around 2140.
As of this morning, 12.1 million BTC were in circulation
Your own bitcoins are stored in a file (your bitcoin wallet) in your own repository – on your computer. The file itself is proof of the amount of BTC you have and it can move with you on your mobile device.
If this file with the cryptographic key in your wallet gets lost, so does your BitCoin stock. And you can’t bring it back.
How much does it cost?
The price varies depending on how much people think it is worth – just like when exchanging “real money”. But since there is no central body trying to keep the value at a certain level, it can change more dynamically. The first BTCs cost almost nothing at the time, but these BTCs still exist. As of 11 a.m. on December 11, 2013, the common price was $ 906.00 per bitcoin. When I finished writing this sentence, it cost $ 900.00. Around the beginning of 2013, the cost was about $ 20.00. On November 27, 2013, it was valued at more than $ 1,000.00 per BTC. So at the moment it’s pretty volatile, but it’s expected to weaken.
The total value of all bitcoins – as of the period at the end of this sentence – is about 11 billion US dollars.
How can I get me a little?
First, you need to have a BitCoin wallet. This article has links to get them.
Then one way is to buy something from another private party like these guys from Bloomberg TV. One way is to buy them on the stock exchange, for example, Mt. Gox.
Finally, one way is to dedicate a lot of computer power and electricity to the process and become a Bitcoin Miner. This is beyond the scope of this article. But if you have a few thousand extra dollars, you can get the installation you need.
How can I spend this?
There are hundreds of merchants of all sizes who accept bitcoin for payment, from cafes to car dealerships. In Vancouver, British Columbia, there is even a BitCoin ATM to convert your BTC into cash in Vancouver, British Columbia.
Money has a long history – millennia. A somewhat recent legend tells us that the island of Manhattan was bought for a vampire – shells and the like. In the early years of the United States, various banks printed their own currency. During a recent visit to Salt Spring Island in British Columbia, I spent a currency that was good only on a beautiful island. A common theme among them was the trust agreement between users that this particular currency has value. Sometimes this value was associated directly with something solid and physical, such as gold. In 1900, the United States pegged its currency directly to gold (the “Gold Standard”), and in 1971 severed ties.
Currency is now traded like any other commodity, although the value of a country’s currency can be backed up or reduced by the actions of their central bank. BitCoin is an alternative currency that is also traded, and its value, like the value of other commodities, is determined by trading, but is not delayed or diminished by the actions of any bank, but directly by the actions of its users. However, its supply is limited and known, and (unlike physical currency) the same story of every bitcoin. Its estimated value, like all other currencies, is based on its usefulness and trust.
As a form of currency, bitcoin isn’t exactly a new thing in Creation, but it’s definitely a new way to make money.