Bitcoin is a virtual currency. It does not exist in the physical form in which we are accustomed to coins and coins. Monopoly does not exist as physically as money. They are electrons, not molecules.
But personally consider how much money you manage. You receive the payment that you take to the bank, or it is self-deposited without even seeing the paper that is not printed. You will then use a debit card (or checkbook, if you are old school) to access these funds. At best, you see 10% cash in your pocket or pocket. So it looks like 90% of the funds you manage are virtual: electrons in a spreadsheet or database.
But wait – they’re US funds (or any country), bank secured and fully trusted by the FDIC, $ 250K per account, right? Well, not exactly. Your financial institution may require you to deposit only 10% of your deposits. In some cases, it is less. Give the rest of your money to other people for 30 years. It charges them for the loan, and charges you for the privilege of lending.
How is money made?
Your bank makes money by lending.
Say you put $ 1,000 in your bank. They then borrow $ 900. All of a sudden you have $ 1000 and someone else has $ 900. Magically, there are $ 1900 in place where there was only one big one before it floated.
Now say that your bank is lending you $ 900 to another bank. This bank, in turn, lends $ 810 to another bank and then lends $ 720 to a customer. Poof! $ 3,430 in an instant – almost $ 2,500 out of nowhere – as long as the bank follows your government’s central bank rules.
The creation of Bitcoin is as different from the creation of banking funds as it is from electrons. It is not controlled by the central banks of a government, but by the consent of users and nodes. It is not created by a limited mint in a building, but by distributed open source software and computer software. And it requires a real form of work for creation. More on that soon.
Who invented BitCoin?
The first BitCoins were in a 50’s block created by Satoshi Nakomoto in January 2009 (“Genesis Block”). At first it had no value. Nakomoto was just a toy for a cryptographer based on a paper published two months earlier. Nakotmoto is a seemingly fictional name; no one seems to know who he is or who he is.
Who keeps track of everything?
After the creation of the Genesis Block, BitCoins was created to keep track of all BitCoin transactions as a kind of public ledger. Nodes / computers that perform book calculations are rewarded for doing so. For each set of successful calculations, the node is rewarded with a certain amount of BitCoin (“BTC”) and then newly created in the BitCoin ecosystem. Hence the term “BitCoin Miner” because the process generates new BTCs. As BTC’s offerings increase and the number of transactions increases, the work required to update the public ledger becomes more difficult and complex. As a result, the number of new BTCs entered into the system is designed to be around 50 BTC (one block), every 10 minutes, worldwide.
While the computing power of BitCoin mining (and updating the public ledger) is increasing exponentially, so is the complexity of the math problem (e.g., which also requires a certain amount of guesswork) or the “proof” of mine. To settle BitCoin and transaction books at any time. So the system still generates only 50 BTC blocks every 10 minutes, or 2106 blocks every 2 weeks.
So in a sense, everyone is tracking it, which means that every node in the network is tracking the history of each BitCoin.
How much is there and where is it?
There is a maximum amount of BitCoin that can ever be generated, which is 21 million. According to Khan Academy, the number is expected to rise around 2140.
There were 12.1 million BTCs in circulation this morning
Your BitCoin is stored in a file (your BitCoin wallet) in your repository – on your computer. The file itself is proof of the number of BTCs you have and can be moved with you on a mobile device.
If you lose that cryptographic key file in your wallet, as well as your BitCoin funds provision. And you can’t go back.
How much is it?
The value varies depending on how much people think they are worth, “just like in exchange for real money.” But since there is no central authority trying to maintain value around a certain level, it can change in a more dynamic way. The first BTCs were worthless at the time, but these BTCs still exist. As of 11:00 a.m. on December 11, 2013, the public value was US $ 906.00 per BitCoin. When I finished writing this sentence, it was $ 900.00. At the beginning of 2013, the value was about $ 20.00. On November 27, 2013, it was valued at more than $ 1,000.00 per BTC. So it’s changing for the time being, but it’s expected to consolidate.
The total value of all BitCoins – at the end of this sentence – is about $ 11 billion.
How can I get some?
First, you need to have a BitCoin wallet. This article has links to get one.
Then one way is to buy another private party, like these guys on Bloomberg TV. One way is to buy in exchange, Mt. Like Gox.
And finally, one way is to provide a lot of computer power and electricity to the process and turn it into a BitCoin miner. That is beyond the scope of this article. But if you have a few thousand extra dollars around, you can get quite a tool.
How can I spend it?
There are hundreds of merchants of all sizes in BitCoin payments, from coffee shops to car dealerships. There is also a BitCoin ATM in Vancouver, British Columbia to convert your BTC into cash in Vancouver, BC.
Money has a long history – millennia long. Legend has it that Manhattan Island was bought for wampum shells. In the early years of the United States, various banks printed their own currency. On a recent visit to British Columbia’s Salt Spring Island, I spent money that was only good on the beautiful island. Among these was the trust agreement between its users, which had the value of a particular currency. Sometimes this value was directly associated with something solid and physical, like gold. In 1900, the US tied its currency directly to gold (the “Gold Standard”), and in 1971, that tie ended.
Now the currency is traded like any other commodity, although the monetary value of a particular country can be boosted or reduced by the actions of its central bank. BitCoin is an alternative currency that is traded and its value, like that of other commodities, is determined by trade, but it does not sustain or reduce the actions of any bank, but rather the actions of its users directly. However, its offer is limited and popular, and (unlike physical currency) it is also the history of each BitCoin. The perceived value, like all other currencies, is based on its usability and confidence.
As a currency, BitCoin is not exactly a new thing in Creation, but it is definitely a new way to make money.