One of the most asked question nowadays is – What is Bitcoin ?
The recent climbs of Bitcoin price made a lot of people to ask what is this digital currency that everyone talk about and how can someone profit by using them.
I’d like to start a series of articles on Bitcoin phenomenon explaining to everyone interested what is bitcoin, how you can earn it and spend it, trusted websites accepting bitcoins and talking about future of this crypto-currency.
What is bitcoin ?
Bitcoin is largely an imaginary piece of code, with no intrinsic value. Gold has intrinsic value for use as jewelry, some in electronics, for making teeth, for coating mirrors, and a host of other possibilities. Silver has even more intrinsic value for medical uses, in film, in coatings for bearings, for it’s heat distribution and electrical properties, etc. Bitcoins, gold, and silver all share one crucial aspect in common. They are all relatively rare.
Bitcoins are like the rewards for a correct answer to a certain math problem. Both the problem and the answer are completely unique. There will be a limit of about 21 million (the eventual exact number is 20999999.97690000) of these special solution rewards known as the “Bitcoin.”
Those dabbling in the complicated technicalities of Bitcoin, such as programmers and promoters, call it a “crypto-currency.” This invented term refers to the form of mathematics that generates the rarity behind the solutions that earn the Bitcoin rewards.
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History of BitCoin
Officially, Bitcoin started in 2009 by a mystery man (or group) with the Japanese name of Satoshi Nakomoto. His name has the same commonality as John Smith has in the U.S. In short, we do not know who started Bitcoin. He kept his identity secret for an important reason.
The domain name, Bitcoin.org was created in 2008 in Helsinki from whois.org. One common theory is that three programmers skilled in cryptography – none of them Japanese – developed the system.
The men behind one of the relevant patents #20100042841 are Neal King, Vladimir Oksman, and Charles Bry. All three have filed several related patents in the encryption, and network management area.
A fantastic article making a strong case for the three man origin of Bitcoin appeared on Fastcompany.com
With nobody pinned as the founder of Bitcoin, this anonymity becomes one of its great strengths. So there is no founder to throw in jail or no central Bitcoin bank to shut down. There is no person or group controlling Bitcoin.
Bitcoins come from a distributed network of people running what are called Bitcoin miners. Having a central processing or controlling location for a currency presents a big problem. Governments, hackers, banks, or general criminals can all attack and often destroy that central authority.
Governments go after alternative currencies. A successful precious metal backed electronic currency called e-gold stirred the ire of government. The founder and head, Dr. Douglas Jackson, was nearly sent to prison for 20+ years.
Nuts and bolts for Bitcoin
Bitcoin is often represented as BTC, or 1 BTC is 1 Bitcoin. We can also deal with 0.1 BTC, 0.01 BTC as we would with say, U.S. dollars. $0.01 USD is also known as 1 cent. Similar for Bitcoins though, it has software behind it that allows for a very small denomination of a Bitcoin that looks a tad scary: 0.00000001 BTC.or 100 millionth of a Bitcoin
This smallest unit of BTC is known affectionately as a “Satoshi” in honor of the genius that developed the whole code framework. Not that the use is popular, but we use the same names from the metric system when describing Bitcoin denominations:
CentiBitcoin is also a bitcent and looks like .01 BTC or 1 cBTC MilliBitcoin is either a bitmil or mbit: .001 BTC or 1mBTC
That is about all we will need for the foreseeable future. For the purists though, the smallest, fashionable BTC is the microbit or ubit with .000001 BTC or 1 uBTC.
If we find ourselves trading in uBTC’s soon then let’s hope we all stocked up on BTC’s before the attack of the 5 zeros!
Bitcoins In Use
We can now buy things with Bitcoins. No cars, planes, diamonds, or furry dinosaur feet are available yet with Bitcoins because it is too new, not fully understood, and somewhat risky. However, many retailers are coming around to Bitcoin;
Bitcoins exploded in value compared to other currencies so prices already use .001 BTC format. The reason is, We value Bitcoins in our national currencies. If we live in the U.S., our national currency is the U.S. dollar or USD for short. Europeans, for the most part, use euros or €.
Out of the gates, Bitcoin was a 6-cent weakling with 1 BTC being priced at 0.06 USD. So the same items we now see priced at 0.294BTC would have been around .416 BTC in Bitcoin’s toddler days of 2009-2010.
Bitcoin is a fast growing online option for payments, so we can expect to see it continue to go deeper into the bitcent, mbit and even ubit prices.
Now that I’ve answered your question on what is bitcoin I invite you to check the investopen bitcoin forum for more news and guides on Bitcoin and other crypto-currencies.