What is Bitcoin?
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 which uses encryption techniques to regulate the generation and the 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. As we learned from history this could cause the potential of inflation for a country’s economy. Alternatively, Bitcoin begins its life as a mathematical equation which is solved by Bitcoin miners. The purpose of a Bitcoin miner is to process transactions and generate Bitcoin by using the hardware from their computer- essentially “printing” the currency. A block chain is a public ledger of all Bitcoin transactions. When a transaction is completed a new block is added. There is only a set amount of Bitcoin and it will take more expensive equipment to generate the power needed in order to process these equations. Once all of the Bitcoin has been mined it will still need computer hardware to process the encrypted transactions to keep the block chain alive.
“Bitcoin begins its life as a mathematical
equation which is solved by Bitcoin miners”
The price of Bitcoin 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 Bitcoin miners and investors alike. Bitcoin transactions are secured against theft and forgery- unlike paper currency. You can’t simply reach out and grab a handful of Bitcoin. The crypto-currency is held within a user’s digital wallet which is generated and likely stored on a computer hard drive or more fittingly- a flash drive 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 would be the Coinbase service which operates a lot like PayPal as far as familiarity and simplicity goes. Almost all users looking to spend or receive cash online rely on PayPal to do so. PayPal is perfidiously the backbone of trust and exchange despite their recent altered terms of service which grants them the right to any and all “copyright, publicity, trademarks, database rights and intellectual property rights you have now or in the future.” When you access your PayPal account you have a balance which is represented only by a combination of red, green, and blue pixels on your computer monitor. You can’t actually hold or break down your balance but you can spend and receive more of those pixels until you cash out and have your funds transferred to your checking account. You can almost declare that PayPal is one of the oldest, largest digital currency exchanges. A Bitcoin balance represented within a digital wallet or online service can’t be held physically unless it too is transferred to your bank account and then withdrawn through an ATM or bank teller as cash.
“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 regards to banks, governments and corporations- it is no wonder why so many buyers and sellers find relief in the age of digital currency. Anonymity, security and trust in the peer-to-peer operation are what Bitcoin and other crypto-currencies represent. Just don’t forget to pay your taxes.