Bitcoin is the new thing everyone is talking about. People are going crazy about it. Investors are pouring their money in it. Some people have become famous by becoming bitcoin millionaire. So what it is all about?
What is Bitcoin?
Bitcoin is a Digital Currency or Crypto Currency. The concept of bitcoin is the brain child of Satosi Nakamoto. This designed digital asset work as a medium of exchange. It is the first decentralized digital currency. It is the first peer to peer payment network that is powered by its users. The technology behind it is block chain technology.
What makes Bitcoin different from normal currencies?
Anyone can use it to buy things electronically. In that sense,its like conventional currencies like dollars euros which are also traded digitally.
However, it’s most important characteristic, and the thing that makes it different to conventional money, 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 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, anyone can join the digital world created by a community of people. You have to ‘mine’ it, 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 it work – say that only 21 million bitcoins miners can get. However, these coins have smaller parts. The smallest divisible amount is one hundred millionth of a bitcoin and called a ‘Satoshi’, after the founder of it.
What is this currency based on?
Conventional currency has been based on gold or silver. Theoretically, you knew that if you handed over a dollar at the bank, you could get some gold back (although this didn’t actually work in practice). But it 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.