What is Bitcoin, how does it differ from "Real" Money and how can I get it?

Bitcoin is a virtual currency. It does not exist in physical form as the currency and coin in which we are accustomed to exist. It does not even exist in a physical form such as Monopoly money. These are electrons – not molecules.

But consider how much cash you personally handle. You get a salary that you take to the bank – or it is automatically deposited without you even seeing the paper on which it is not printed. Then use a debit card (or checkbook if you are an old school) to access these funds. At best, you see 10% of it in cash in your pocket or in your pocket. So, it turns out that 90% of the assets you manage virtually are electrons in a table or database.

But wait – these are US funds (or those from any country you come from), safe in a bank and guaranteed full faith by the FDIC up to about $ 250,000 per account, right? Not really. Your financial institution may require only 10% of its deposit on the deposit. In some cases it is even less. He lends the rest of your money to other people under the age of 30. He charges them a loan, and you have the privilege of lending it to them.

How is money made?

Your bank can make money by lending.

Let’s say you have deposited $ 1,000 with your bank. Then they give $ 900 of it. Suddenly you have $ 1,000 and someone else has $ 900. Magically, $ 1,900 floats around where only catfish used to be.

Now say your bank lends $ 900 to another bank instead. That bank in turn lends $ 810 to another bank, which then lends $ 720 to the client. Poof! $ 3,430 in an instant – almost $ 2,500 created from nothing – as long as the bank follows your government’s central bank rules.

Creating bitcoin is different from creating bank funds such as cash from electrons. It is not controlled by the central bank of the government, but by the consensus of its users and nodes. It is not created by the limited mint in the building, but by the distributed open source software and computing. And creation requires a form of real work. More on that soon.

Who Invented BitCoin?

The first bitcoins were in the 50 Genesis Block created by Satoshi Nakomoto in January 2009. At first, it had no value. It was just a toy cryptograph based on a work published by Nakomoto two months earlier. Nakotmoto is obviously a fictional name – no one seems to know who he or she is.

Who is following all this?

After Genesis Block was created, bitcoins have since been generated by doing the job of tracking all transactions for all bitcoins as a kind of public ledger. The nodes / computers that perform the calculations in the book are rewarded for this. For each set of successful calculations, the node is rewarded with a certain amount of BitCoin (“BTC”), which is then regenerated into the BitCoin ecosystem. Hence the term “BitCoin Miner” – because the process creates a new BTC. As the supply of BTC increases and as the number of transactions increases, the work required to update the public ledger becomes more and more 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 computational power of BitCoin mining (and public ledger updates) is currently increasing exponentially, the complexity of the mathematical problem (which, by the way, also requires a certain amount of guesswork), or “evidence” needed to mine BitCoin and settle transaction books, is growing. at any time. So the system still generates only one block of 50 BTC every 10 minutes, or 2106 blocks every 2 weeks.

So, in a way, everyone takes care of that – that is, all the nodes in the network keep a record of the history of each individual BitCoin.

How many are there and where are they?

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 reach its maximum around 2140.

As of this morning, 12.1 million BTCs were in circulation

Your own BitCoin is stored in a file (your BitCoin wallet) in your own storage – your computer. The file itself is proof of the number of BTCs you have, and can navigate with you on your mobile device.

If that cryptographic key file in your wallet is lost, your BitCoin stock is also lost. And you can’t bring him back.

how much is it worth

Value varies depending on how much people think it’s worth – just like in “real money” exchange. But since there is no central body trying to keep value at a certain level, it can vary more dynamically. The first BTCs at the time were basically worthless, but those BTCs still exist. As of 11 a.m. on December 11, 2013, the public value was $ 906.00 per bitcoin. When I finished writing this sentence, it was $ 900.00. At about the beginning of 2013, the value was about $ 20.00. On November 27, 2013, it was estimated at more than $ 1,000.00 per BTC. So it is a bit unstable at the moment, but it is expected to calm down.

The total value of all BitCoins – from the period at the end of this sentence – is about 11 billion US dollars.

How do I get some?

First, you need to have a BitCoin wallet. This article contains download links.

Then one way is to buy something at another private party, like these guys on Bloomberg TV. One way is to buy something on the stock market, such as 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 nearby, you can get quite a bit of equipment.

How do I spend it?

There are hundreds of traders of all sizes who take bitcoin for payment, from cafes to car dealerships. There is even a BitCoin ATM in Vancouver, British Columbia to convert your BTC into cash in Vancouver, BC.

And so?

Money has a long history – millennia. A slightly newer legend tells us that the island of Manhattan was bought for a vampum – 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 agreement on trust among users that the currency has value. Sometimes that value was directly tied to something solid and physical, like gold. In 1900, the United States pegged its currency directly to gold (the “Gold Standard”) and in 1971 severed that bond.

Currency is now traded like any other commodity, although the value of a country’s currency can be supported or diminished by the actions of their central bank. BitCoin is an alternative currency that is also traded and its value, as well as the value of other commodities, is determined by trade, but is not retained or diminished by the actions of any bank, but directly by the actions of its users. However, its offer is limited and well-known, and (unlike physical currency) so is the history of each individual BitCoin. Its perceived value, like all other currencies, is based on its usefulness and trust.

As a form of currency, BitCoin is not exactly a new thing in Creation, but it is certainly a new way of making money.