"WHat is bitcoin?"
by Matthew Roberts, Certified General Real Estate Appraiser
What is a Bitcoin?
Bitcoin is the first successful digital currency. Instead of physical coins or paper bills, this currency is represented as a long string of numbers and letters. Because Bitcoins are not physical and are not controlled by any central authority they can be instantly transferred to anyone anywhere in the world, and at low or no cost. Digital currency provides a faster, cheaper, and reliable way to transfer money for any reason and to anyone, compared to physical currency exchanges or wire transfers which can be very costly.
If it is just computer code, can someone just create as much as they want?
The short is answer is no. The “block chain” technology prevents any invalidated transactions or creation of new currency.
What is the Block Chain?
The block chain is the coding/accounting system that makes digital currency possible. It is essentially a decentralized ledger. Volunteers and ‘miners’ offer up their computing space to keep track of every transaction made. The systems that keep the ledgers may come and go but the decentralized nature of the networks allow every transaction to be recorded and verified, from the very first to the hundreds that took place while you were reading this. That means Bitcoin can’t be fraudulently copied, and it can’t be shut down.
Are Bitcoin transactions anonymous?
Yes and no. Every transaction is seen in the block chain. However, each transaction is only identified by the address you use (a random string of numbers and letters) and not your name or identity. So peer-to-peer Bitcoin transactions can be ‘anonymous’. However, some transactions are connected to Bitcoin exchanges and to bank accounts which do contain personal information. This is true for bank accounts you are using to deposit and withdraw money to buy and sell Bitcoin. Also, since all transactions are recorded on the Block Chain, if a handful of your transactions are identified, simple inference can identify other related transactions and identify you.
Who invented it?
What’s weird is that no one really knows. It was created in 2009 by someone (or a group) using the name Satoshi Nakamoto. Many known coders and digital entrepreneurs were recruited as volunteers to help get it started, and even they do not know Nakamoto’s identity with 100% certainty. Many people believe the cryptocurrency was created in response to the 2007-2008 financial crisis as a way to hedge against government and financial corruption.
What is a cryptocurrency?
A cryptocurrency is a digital currency which utilizes encryption to secure and validate transactions and to regulate the creation of new currency units. Bitcoin is an example of this.
Where can I get it?
Right now, the best place for a beginner to get it is from an exchange on the internet. Coinbase.com currently seems to be the most popular. You can also trade currencies on Poloniex.com.
Bitcoin is the most well-known digital currency, but now there are hundreds of competing digital currencies available, and more are being created by entrepreneurs. Each has its own purported purpose or gimmick. Some are more secure, faster to transact, or integrated as part of a product or service. For instance, PotCoin, is attempting to be the go-to digital currency for buyers and sellers of legal cannabis. Steemit is a blogging-style social network, like Reddit, but with one major difference: it pays both content creators and curators in Steemit digital currency for popular content. Bitcoin itself may not be the best at everything, but it is the most popular. So while there is a market cap of how many Bitcoin will exist, at 21 million, there are infinite competing digital currency options.
While the technology is relatively new, one thing is for sure, digital currencies are not going away, and you will likely use one much sooner than you think.
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