What is a bitcoin?
Bitcoin is what is referred to as a ‘crypto-currency.’
It is the internet’s version of money – a unique pieces of digital property that can be transferred from one person to another.
Bitcoins are generated by using an open-source computer program to solve complex math problems. This process is known as mining.
Each Bitcoin has it’s own unique fingerprint and is defined by a public address and a private key – or strings of numbers and letters that give each a specific identity.
They are also characterized by their position in a public database of all Bitcoin transactions known as the blockchain.
The blockchain is maintained by a distributed network of computers around the world.
Because Bitcoins allow people to trade money without a third party getting involved, they have become popular with libertarians as well as technophiles, speculators — and criminals.
Where do Bitcoins come from?
People create Bitcoins through mining.
Mining is the process of solving complex math problems using computers running Bitcoin software.
These mining puzzles get increasingly harder as more Bitcoins enter circulation.
The rewards are cut in half at regular intervals due to a deliberate slowdown in the rate at which new Bitcoins enter circulation.
Who’s behind the currency?
Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto and then adopted by a small clutch of enthusiasts.
Nakamoto dropped off the map as Bitcoin began to attract widespread attention, but proponents say that doesn’t matter: the currency obeys its own, internal logic.
Dr Craig Wright was suspected as the creator following a report by Wired last year and he has now confirmed his identity as the cryptocurrency’s founder.
What’s a bitcoin worth?
Like any other currency, Bitcoins are only worth as much as you and your counterpart want them to be.
Bitcoins are lines of computer code that are digitally signed each time they travel from one owner to the next. Physical coin used as an illustration
In its early days, boosters swapped Bitcoins back and forth for minor favours or just as a game.
One website even gave them away for free.
As the market matured, the value of each Bitcoin grew.
Is the currency widely used?
That’s debatable.
Businesses ranging from blogging platform WordPress to retailer Overstock have jumped on the Bitcoin bandwagon amid a flurry of media coverage, but it’s not clear whether the currency has really taken off.
On the one hand, leading Bitcoin payment processor BitPay works with more than 20,000 businesses – roughly five times more than it did last year.
On the other, the total number of Bitcoin transactions has stayed roughly constant at between 60,000 and 70,000 per day over the same period, according to Bitcoin wallet site blockchain.info.
Is Bitcoin particularly vulnerable to counterfeiting?
The Bitcoin network works by harnessing individuals’ greed for the collective good.
A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction.
The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional Bitcoin.
As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.