You have probably heard of the term Bitcoin more recently as its popularity is perpetuated by the current state of economics and the advancements in technology. But, what is Bitcoin? It is a concept that isn’t entirely simple to explain with just a few common words. Bitcoin in a sense is an economy, an entirely new form of currency and its own reserve.
It is more accurately described as a type of digital currency. This crypto-currency uses encryption techniques to regulate the generation and transfer of funds, while, operating independently of a central bank or government. Central banks print paper money. A mesh of cotton fibers that promises a value when transferred from person to person. Consequently, we have learned from history this could cause the potential of inflation for a country’s economy. Alternatively, any cryptocurrency begins its life as a mathematical equation which is solved by miners.
What is Bitcoin Mining?
The purpose of a miner is to process transactions and generate cryptocurrency using the hardware from their computer. A blockchain is a public ledger of all transactions. A transaction is completed a new block is added. There is only a set amount of Bitcoin. It will take more expensive equipment to generate the power needed to process these equations. Once all of the Bitcoin has been mined, computer hardware would still be needed to process encrypted transactions.
“Bitcoin begins its life as a mathematical equation which is solved by Bitcoin miners”
What is it Worth?
The price of cryptocurrency is determined by the current exchange rate. The value is determined by its usefulness. Bitcoin is a decentralized currency meaning it doesn’t exist under the control of any government or entity. It is a peer-to-peer currency that operates with the help of miners and investors alike. Transactions are secured against theft and forgery. You can’t simply reach out and grab a handful of these digital coins.
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Bitcoin is held within a user’s digital wallet. This is generated and likely stored on a computer hard drive. A more secure storage method would be cold storage, wallets stored on a USB. These can be securely locked away in a safe. A bouquet of new services has emerged from the development and mainstream success of Bitcoin. One of the most ideal models of transferring funds is Coinbase. This service operates a lot like PayPal, as far as familiarity and simplicity goes.
“One of the most ideal models of transferring funds would be the Coinbase service”
Given the history of the world’s economy and the dissipation of trust in banks, governments and corporations, it is no wonder why so many people find relief in digital currency. Anonymity, security and trust in the peer-to-peer operation are what Bitcoin and other cryptocurrencies represent. Just don’t forget to pay your taxes.