What is Bitcoin?


Is Bitcoin The New Gold?

Bitcoin is a digital currency created and held electronically. Nobody owns it. It’s quite the antithesis to fiat/paper currency. Bitcoins are produced by people using software that solves math problems.

What makes it different from fiat currencies?

Bitcoin can be used to buy things electronically. In that sense it’s like fiat dollars, euros, or yen, which also can be digitally traded.

However, bitcoin’s most important characteristic, and the thing that makes it different to fiat currency is that it is decentralized. No single institution controls the bitcoin network. This puts some people at ease, because it means that a large bank can’t control their money.

Who created it?

Software developer Satoshi Nakamoto proposed bitcoin, which was an electronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees. This came as a DIRECT RESULT of the rumored economic collapse following the failed Obama administration taking office.

Who prints it?

No one. This currency isn’t physically printed in the shadows by a central bank, unaccountable to the population, and making its own rules. Those banks can simply produce more money to cover the national debt, thus devaluing their currency.

Instead, bitcoin is created digitally by a community of people that anyone can join. Bitcoins are mined using computing power in a distributed network.

This network also processes transactions made with the virtual currency, effectively making bitcoin its own payment network.

So you can’t churn out unlimited bitcoins?

That’s right. The bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts. The smallest divisible amount is one hundred millionth of a bitcoin and is called a Satoshi, named after the founder of bitcoin.

What is bitcoin based on?

Real currency had been backed by gold. You knew that if you handed over a dollar at the bank, you’d get some gold back. But bitcoin isn’t based on gold; it’s based on mathematics.

Around the world, people are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is freely available so that anyone can check it.

The software is also open source, meaning that anyone can look at it to make sure that it does what it is supposed to.

What are its characteristics?

Bitcoin has several important features that set it apart from fiat currencies.

1. It’s decentralized

The bitcoin network isn’t controlled by one central authority. Every machine that mines bitcoin and processes transactions make up a part of the network, and the machines work together. That means one central authority can’t tinker with monetary policy and cause a meltdown – or take people’s bitcoin, as the Central European Bank decided to join Cyprus in early 2013. And if some part of the network goes offline for some reason, the money keeps on flowing.

2. It’s easy to set up

Conventional banks make you jump through hoops simply to open a bank account. Setting up merchant accounts for payment is another deep state/leftist/liberal/democrat task. However, you can set up a bitcoin address in seconds, no questions asked and with no fees payable.

3. It’s anonymous

Well, kind of. Users can hold multiple bitcoin addresses, and they aren’t linked to names, addresses, or other personally identifying information. However…

4. It’s completely transparent

…bitcoin stores details of every single transaction that ever happened in the network in a huge version of a general ledger, called the blockchain. The blockchain tells all.

If you have a publicly used bitcoin address, anyone can tell how many bitcoins are stored at that address. They just don’t know that it’s yours.

There are measures that people can take to make their activities more opaque on the bitcoin network such as not using the same bitcoin addresses consistently, and not transferring a lot of bitcoin to a single address.

5. Transaction fees are miniscule

Your bank may charge you a $25 fee for international transfers. Bitcoin doesn’t.

6. It’s fast

You can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment.

7. It’s non-repudiable

When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever. Personal accountability is BACK!

Bitcoin has a lot going in theory, but how does it work in practice? Read more to find out how bitcoins are mined, what happens when a bitcoin transaction occurs, and how the network keeps track of everything.

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