What Is Bitcoin, How Is It Different Than "Real" Money and How Can I Get Some?

Bitcoin is a virtual currency. It does not exist in the physical form in which the currency and coin in which we are accustomed exist. It doesn’t even exist in a physical form like money monopoly. These are electrons, not molecules.

But consider how much cash you personally have. You get a salary that you take to the bank – or it is automatically deposited without even seeing the paper on which it is not printed. You then use a debit card (or checkbook if you are old school) to access these funds. At best, you see 10% of it in cash in your pocket or pocket. So it turns out that 90% of the funds you manage are virtual – electrons in a spreadsheet or database.

But wait – it’s US funds (or from any country you came from), safe in the bank and guaranteed full FDIC faith of up to about $ 250,000 per account, right? Well, not quite. Your financial institution may only require 10% of its deposits on deposit. In some cases it is less. The rest of the money you lend to other people for up to 30 years. He takes a loan from them, and you – for the privilege of giving them a loan.

How is money created?

Your bank gets the opportunity to make money by borrowing them.

Let’s say you deposit $ 1,000 into your bank. They then borrow $ 900. Suddenly you have $ 1,000 and someone else has $ 900. Magically, there floats $ 1,900, where previously there was only a grand.

Now say your bank lends $ 900 to another bank. In turn, this bank lends $ 810 to another bank, which then lends the customer $ 720. Poof! $ 3,430 in an instant – almost $ 2,500 created from nothing – as long as the bank follows the rules of your government’s central bank.

Creating bitcoins is just as different from creating bank funds as cash is from electrons. It is not controlled by the government central bank, but rather by the consensus of its users and nodes. It is created not by a limited mint in the building, but rather by distributed open source software and computing. And to create you need a form of real work. More on that soon.

Who Invented BitCoin?

The first bitcoins were in a block of 50 (the “Block of Genesis”) created by Satoshi Nakamoto in January 2009. At first it really didn’t matter. It was just a cryptograph game based on a work published by Nakomoto two months earlier. Nakotmota is apparently a fictitious name – no one seems to know who he or they are.

Who keeps track of it all?

After the creation of Genesis Block from now on BitCoins are created, performing the work of accounting for all transactions for all Bitcoin as a kind of public book. Nodes / computers that make calculations in the book are rewarded for this. For each set of successful calculations, the node is rewarded with a certain amount of BitCoin (“BTC”), which are then re-created in the BitCoin ecosystem. Hence the term “BitCoin Miner” – because the process creates new BTCs. As the supply of BTC increases and the number of transactions increases, the work of updating the state book becomes more and more complex. As a result, the number of new BTCs in the system is estimated at about 50 BTCs (one unit) every 10 minutes worldwide.

Although the computing power for BitCoin mining (and for updating the public book) is now increasing exponentially, the complexity of the math problem (which, incidentally, also requires a certain amount of assumptions) or “proof” required also increases. for BitCoin mining and for calculating transaction books at any time. Thus, the system still generates only one block per 50 BTC every 10 minutes, or 2106 blocks every 2 weeks.

So, in a sense, all of this is tracked – that is, all nodes in the network track the history of each individual BitCoin.

How much is there and where?

There is a maximum amount of BitCoin that can ever be created, and that number is 21 million. According to the Khan Academy, the number is expected to increase in about 2140.

As of this morning, 12.1 million BTC was in circulation

Your own BitCoin is stored in a file (your BitCoin wallet) in your own repository – your computer. The file itself is proof of the amount of BTC you have and it can move with you on your mobile device.

If the file with the cryptographic key in your wallet is lost, the BitCoin offer will also be lost. And it cannot be returned.

How much does it cost?

The cost varies depending on how much people think it is worth – as with exchanging “real money”. But since there is no central body that seeks to keep the value at a certain level, it can change more dynamically. The first BTCs at the time were worthless, but these BTCs still exist. As of 11 a.m. on December 11, 2013, the public price was $ 906.00 per bitcoin. When I finished writing this sentence, it was $ 900.00. Around the beginning of 2013, the cost was about $ 20.00. On November 27, 2013, it was valued at more than $ 1,000 per BTC. So it’s currently volatile, but it’s expected to calm down.

The total value of all BitCoin – as of the period at the end of this sentence – is about $ 11 billion.

How do I get it?

First, you need to have a BitCoin wallet. This article has links to get it.

Then one way is to buy some other private party like these guys on Bloomberg TV. One way is to buy them on an exchange, such as Mt. Hawks.

Finally, one way is to devote a lot of computing power and electricity to this process and become a BitCoin miner. This goes far beyond this article. But if you have a few thousand extra dollars, you can get a real fake.

How can I spend it?

There are hundreds of merchants of all sizes who accept BitCoin for a fee, from coffee shops to car dealerships. In Vancouver, British Columbia, there is even a Bitcoin ATM to convert BTC to cash in Vancouver, British Columbia.

And so?

Money has a long history – a millennium. A somewhat recent legend tells us that the island of Manhattan was purchased for a vampum – shells and the like. In the early years of the United States, various banks printed their own currency. During a recent visit to Salt Spring Island in British Columbia, I spent a currency that was only good on a beautiful island. A common theme among them was the trust agreement between users that this particular currency has value. Sometimes this value was tied directly to something solid and physical, such as gold. In 1900, the United States pegged its currency directly to gold (the “Gold Standard”), and in 1971 severed ties.

Currency is now traded like any other commodity, although the value of a country’s currency can be backed up or reduced by the actions of the central bank. BitCoin is an alternative currency that is also traded, and its value, like other commodities, is determined by trading, but is not withheld or diminished by the actions of any bank, but directly by the actions of its users. Its offering is limited and known, however (and unlike physical currency) the history of each bitcoin. Its apparent value, like the rest of the currency, is based on its usefulness and trust.

As a form of currency, BitCoin isn’t exactly a new thing in creating, but it’s definitely a new way to make money.