It’s not an actual coin, it’s “cryptocurrency,” an electronic form of payment that’s produced (“mined”) by lots of people worldwide. It allows peer-to-peer transactions instantly, worldwide, free of charge or at suprisingly low cost.
Bitcoin was invented after decades of research into cryptography by software developer, Satoshi Nakamoto (thought to be a pseudonym), who designed the algorithm and introduced it in ’09 2009. His true identity remains a mystery.
This currency is not backed by a tangible commodity (such as gold or silver); bitcoins are traded online which makes them a commodity in themselves.
Bitcoin can be an open-source product, accessible by anyone who is a user. All you have to is an email address, Internet access, and money to get started.
Where does it come from?
Bitcoin is mined on a distributed computer network of users running specialized software; the network solves certain mathematical proofs, and searches for a specific data sequence (“block”) that produces a particular pattern when the BTC algorithm is applied to it. A match produces a bitcoin. It’s complex and time- and energy-consuming.
Only 21 million bitcoins are ever to be mined (about 11 million are in circulation). The math problems the network computers solve get progressively more challenging to help keep the mining operations and offer in check.
This network also validates all of the transactions through cryptography.
How does Bitcoin work?
Internet users transfer digital assets (bits) to each other on a network. There is no online bank; rather, Bitcoin has been described as an Internet-wide distributed ledger. Users buy Bitcoin with cash or by selling a product or service for Bitcoin. Bitcoin wallets store and utilize this digital currency. Users may sell using this virtual ledger by trading their Bitcoin to another person who wants in. Anyone can perform this, anywhere in the world.
There are smartphone apps for conducting mobile Bitcoin transactions and Bitcoin exchanges are populating the web.
How is Bitcoin valued?
Bitcoin is not held or controlled by way of a financial institution; it is completely decentralized. Unlike real-world money it cannot be devalued by governments or banks.
Instead, Bitcoin’s value lies simply in its acceptance between users as a kind of payment and because its supply is finite. Its global currency values fluctuate in accordance with supply and demand and market speculation; as more folks create wallets and hold and spend bitcoins, and much more businesses accept it, Bitcoin’s value will rise. Banks are actually trying to value Bitcoin and some investment websites predict the cost of a bitcoin will be several thousand dollars in 2014.
What are its benefits?
There are benefits to consumers and merchants that are looking to utilize this payment option.
1. Fast transactions – Bitcoin is transferred instantly online.
2. No fees/low fees — Unlike bank cards, Bitcoin can be used free of charge or very low fees. Without the centralized institution as middle man, you can find no authorizations (and fees) required. This improves income sales.
3. Eliminates fraud risk -Only the Bitcoin owner can send payment to the intended recipient, who is the only one who is able to receive it. The network knows the transfer has occurred and transactions are validated; they can not be challenged or taken back. That is big for online merchants who are often subject to credit card processors’ assessments of whether or not a transaction is fraudulent, or businesses that pay the high price of charge card chargebacks.
4. Data is secure — Once we have seen with recent hacks on national retailers’ payment processing systems, the Internet isn’t always a secure place for private data. With Bitcoin, users do not give up private information.
a. They will have two keys – a public key that serves because the bitcoin address and a private key with personal data.
b. Transactions are “signed” digitally by combining the general public and private keys; a mathematical function is applied and a certificate is generated proving an individual initiated the transaction. Digital signatures are unique to each transaction and cannot be re-used.
c. The merchant/recipient never sees your secret information (name, number, home address) so it is somewhat anonymous but it is traceable (to the bitcoin address on the public key).
5. Convenient payment system — Merchants may use Bitcoin entirely as a payment system; they do not need to hold any Bitcoin currency since Bitcoin can be changed into dollars. Consumers or merchants can trade in and out of Bitcoin along with other currencies at any time.
6. 코인커뮤니티 – Bitcoin is used around the globe; e-commerce merchants and providers can simply accept international payments, which open up new potential marketplaces for them.
7. Easy to track — The network tracks and permanently logs every transaction in the Bitcoin block chain (the database). In the case of possible wrongdoing, it really is easier for police to trace these transactions.
8. Micropayments are possible – Bitcoins can be divided right down to one one-hundred-millionth, so running small payments of a dollar or less becomes a free or near-free transaction. This may be a real boon for convenience stores, coffee shops, and subscription-based websites (videos, publications).