we used money everyday, but we rarely appreciate its power and its flaws. say there is a coin that is currently worth of hundredths dollars but it is not made of gold or platinum or any precious medal. In fact, it's not a kind of coin that you can hold on your hand or sticking in the piggy bank. It is a digital currency which mean, it is only exists electronically and I am taking about BITCOIN.
Bitcoin doesn't work like most money it is attached on the state or government so it doesn't have a central issuing authority or regulatory body. Basically, that THERE'S NO ORGANIZATION deciding when to make more bitcoins figuring out how many to produce keeping track of where they are or investigating fraud.
So how is bitcoin work as a currency? or have any value at all.
Well, bitcoin doesn't exists without the whole network of people and little thing called CRYPTOGRAPHY. In fact, it sometimes describe the world first CRYPTOCURRENCY.
Bitcoin is a fully digital currency and you can exchange bitcoin between computers and a WORLDWIDE PEER TO PEER NETWORK. If a bitcoin is a digital currency, what stopping you from being fabulous wealthy? well, unlike the MP3 or video file, a bitcoin is not a string of data that can be duplicated. A bitcoin is actually an entry on a huge global ledger of A BLOCKCHAIN.
The BLOCKCHAIN records every bitcoin transaction that has ever happened and as of late 2015 the COMPLETE LEDGER is about 107GBs of data. So when you sent someone bitcoin it not like sending them a bunch of files. Instead, you basically exchange down on a big ledger something like Michael send hank 5.1 bitcoins.
Now maybe you're thinking, wait... you've said bitcoin doesn't have the central authority to keep track of everything. Even though the BLOCKCHAIN central record, there's no official group of people who update the ledger and keep track of everybody's money like the bank does IT'S DECENTRALIZED.
In fact, anybody can volunteer to keep the blockchain up to date without new transactions and a ton of people do. It all works because there's a lot of people keep track of the same thing to make sure that all transaction are accurate.
Now if thousands of people maintain separate the bitcoin blockchain how are all the ledger keep in sync?
For every transaction, you're announcing a couple the account of things to the bitcoin network :your account #, the account #of the person you're sending bitcoins to and how many bitcoins you want to send and all of the users will keeping copies of the blockchain will add your transaction to current block. Having a bunch of people keep tracking of transactions seems have pretty security measures. But, if all takes the same bitcoin as a coupled of bitcoin account numbers that seems might be a security problem. It's a huge problems as the regular money just think of the ways how is the criminals trying to steal other people credit card information and with bitcoin there's no central bank to notice weird going to shutdown fraud and look like you suddenly you spent your entire life saving on beef jerky.
Bitcoin are pretty safe thanks to cryptography which wide considered a cryptocurrency. Specifically, bitcoin stay secure because of the keys: basically chunk of information that can be used to make mathematical guarantees about messages, like "HEY THIS IS REALLY FROM ME" when you create account on a bitcoin network where might call wallet, that account is link to 2 unique keys. The private key and the public key. In this case, private key contains some data and basically market it also known as signing it so other people can verify the signatures later if they want. in other words, if the public key works that's proof that the message was signed by the private key of someone and is something he /she wanted to send. Unlike a written signature or credit card number, this period of identity isn't something that can be fake by a scam artist.
The WHO part of each transaction is obviously important to make sure that the right people are swapping bitcoin but the WHEN others as well. Both the bitcoin and your wallet automatically check your previous transaction to make sure you have enough bitcoin to send in the first place. But the is another problem that might encounter sometimes,because lot of people keeping copies of the blockchain all over the world the network delays means that you won't always receive the transaction request in the same order. To add the block transactions to the chain each person maintain a ledger has to solved special kind of math problem created by cryptographic hash function.
A hash function is an algorithm, it takes an input of any size, and turns it into an output with a fixed size. The hash function bitcoin uses is CALLED SHA256 which stands for Secure Hash Algorithm 256-bit and it is originally developed by the United States National Security Agency. Computers that were specifically designed to solved SHA256 HASH Problems take, on average, about 10 minutes to guess the solution to each one.
Today, every time you win the race to win the block and add to the blockchain, 12.5 new bitcoins are created or of thin air and awarded to your account. in fact, you might know that bitcoin ledger keep by another hand _miners. When bitcoins where first created in 2009,they didn't have any perceive value tends of bitcoins would have been worth the same as a bunch of pennies.
As of November 10th 2016, 1 bitcoin is worth of $708 so 12.5 bitcoins worth of $8080 and that is a nice track of chain. Every single bitcoin exists we're created to reward a bitcoin miner, beside the big payout when they add new block of transaction numbers are also tipped a very small amount for small transaction they add to the ledger it's also worth knowing that every 210 000 blocks the number of coins generated when a new block is added goes down by half. So what started as a reward of 50 bitcoins decrease to 25 then 12.5 it'll only be around 6 bitcoin in a couple more years, and keep decreasing.
According to current projection, the last bitcoin (probably around the 21 millionth coins) will be mined in the year 2140. So investing bitcoin is a good idea? now that's not really a kind of question. bitcoin is still in experimental period a lot of people love it and a lot of people is thinking that it will fail. Let's just think that this is an interesting idea and will serve us asa guide.
Thank you for reading
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