Bitcoin has been around for almost a decade, but digital currency is still viewed by many as a fringe investment or an opportunity for criminals. This perception ignores that Bitcoin and other cryptocurrencies fundamentally change how we think about money. Learn How To Purchase Cryptocurrency With PayPal.
As digital currencies like Bitcoin gain popularity, they pose new questions about how we define and understand money. They raise questions about whether traditional forms of payment even qualify as money.
Bitcoin (BTC) is electronic money that is generated by computers.
Bitcoin is electronic money that is generated by computers. Any single entity does not back bitcoins, so they have no value. This means you cannot use bitcoins to buy things at stores like you would use dollars or euros. Bitcoin’s price constantly changes due to supply and demand factors in the open market for this digital currency.
The programming language Santoshi used was called C++ (pronounced “C plus plus”). In 2010, it created the first bitcoin network with ten original nodes. These nodes were called “miners.” Today there are over 11 million machines running bitcoin software worldwide!
Unlike normal money, the total number of bitcoins that can be created is finite. Bitcoin’s supply is limited to 21 million bitcoins. This means that unlike the US dollar, whose supply can be increased at will by the Federal Reserve, it can ever create a fixed number of bitcoins. This starkly contrasts with most fiat currencies, which are inflationary, meaning their value decreases over time as more coins are printed.
Bitcoin is a deflationary currency because its supply decreases over time and increases in value due to scarcity and demand for it on the market. This makes sense if you think about it. If something becomes scarcer, it gets more expensive over time because people want it more than ever before.
Each bitcoin (BTC) is divisible down to eight decimal places.
A bitcoin can be divided into eight decimal places, meaning you can buy a small fraction of a bitcoin. This is a feature of the bitcoin protocol, which means you can purchase $0.0015 worth of goods or services if you have one bitcoin in your wallet, the same as buying $3.141592659 millionths of a dollar’s value of goods or services with your credit card.
A complex algorithm generates bitcoins and ensures currency creation follows an established schedule. Any single entity doesn’t control Bitcoin. Bitcoins are produced through a process called mining that’s constantly monitored by computers worldwide. The computer algorithms behind bitcoin have been designed to ensure that no more than 21 million bitcoins can ever be created.
The algorithm is designed so that new bitcoins are minted regularly: about 25 bitcoins every 10 minutes or so. In other words, if you had a computer fast enough and willing enough to run nonstop 24/7 for two days straight without stopping for food or sleep and assuming nothing went wrong with your system. You would earn just over one bitcoin every two days on average!
Bitcoin is pseudonymous, meaning transactions are not tied to real-world identities.
This is a common misconception. While bitcoin transactions are public and can be traced, they aren’t anonymous. Bitcoin addresses are pseudonymous: they’re derived from public keys but don’t have any real-world identity or name associated with them.
Bitcoin transactions are not linked to names, email addresses, or other personal information you could use for real-world identity verification. As long as you own the private keys for your bitcoin addresses (and you keep them safe), no one else can access those funds without your permission. Even if they know your address and spend some time trying to guess what it might be worth.
Bitcoin was created as an experiment and has since become a large and vibrant ecosystem with many people using it for transactions. For cryptocurrency trading, use bitcoin trading software because it has the lowest fees. There are two ways for people to get hold of bitcoins mining them or buying them from someone else on an exchange. The price of a single bitcoin has increased from $0 in 2009 to more than $10,000 today, and there are no signs of this slowing down anytime soon.