What is Bitcoin?
‘Bitcoin’ when written so, refers to the virtual system operating with the ‘bitcoins’ that is actually the name of the currency of this system. What started out as an experimental project that was created by Satoshi Nakamoto as a hobby has now become a full-fledged currency that is being championed by the likes of Bill Gates and Al Gore, both of whom think the currency, with no limitation around a country, is a great idea.
So, how does it work?
One needs software to mine these out, like gold from inside the mountains. However, all the easy ones, so they say, have been mined to date. Therefore, there will be no use mining these out on your PC. There is 1 million of bitcoins in existence, and as per the professionals, the total number at 21 million should be able to be unearthed by the year 2140. These bitcoins currently have a worth of $1.04 billion which is a lot especially for something that one cannot see!
The bitcoin can change a lot of hands, but it cannot be spent twice. A user might have a number of addresses. There is always a check and balance happening to ensure that the transaction is secure. In return for their services, miners are paid fees by the vendors/merchants of each transaction and are also given physical, minted bitcoins.
What’s so good about this?
- Bitcoin uses peer-to-peer technology to operate with no central authority or banks, so there is no uncertainty that might come with having a regulatory body. Interest rates high one minute, and then down another minute. There is strikingly limited inflation.
- Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part, hence less likely it falling into a powerful person;s hand
- The transfer of funds is fairly quick and easy
What could rip it?
Like any technology, this too, is not without cons. The technology, if misused, can be used in money laundering. Anybody can use this currency anonymously, and it is for this reason that a lot of problems arise. A case in point is the recent fiasco between Mizuhu and Mt. Gox. “Mt. Gox blames systematic attacks on what it acknowledges was lax computer security” and that is where the challenge is – how to make the system secure
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