Bitcoin is a type of cryptocurrency: Balances are kept using public and private “keys,” which are long strings of numbers and letters linked through the mathematical encryption algorithm that was used to create them. The public key (comparable to a bank account number) serves as the address which is published to the world and to which others may send bitcoins. The private key (comparable to an ATM PIN) is meant to be a guarded secret, and only used to authorize Bitcoin transmissions.
Style notes: According to the official Bitcoin Foundation, the word “Bitcoin” is capitalized in the context of referring to the entity or concept, whereas “bitcoin” is written in the lower case when referring to a quantity of the currency (e.g. “I traded 20 bitcoin“) or the units themselves. The plural form can be either “bitcoin” or “bitcoins.”
How Bitcoin Works
Bitcoin is one of the first digital currencies to use peer-to-peer technology to facilitate instant payments. The independent individuals and companies who own the governing computing power and participate in the Bitcoin network, also known as “miners,” are motivated by rewards (the release of new bitcoin) and transaction fees paid in bitcoin. These miners can be thought of as the decentralized authority enforcing the credibility of the Bitcoin network. New bitcoin is being released to the miners at a fixed, but periodically declining rate, such that the total supply of bitcoins approaches 21 million. One bitcoin is divisible to eight decimal places (100 millionth of one bitcoin), and this smallest unit is referred to as a Satoshi. If necessary, and if the participating miners accept the change, Bitcoin could eventually be made divisible to even more decimal places.
Bitcoin mining is the process through which bitcoins are released to come into circulation. Basically, it involves solving a computationally difficult puzzle to discover a new block, which is added to the blockchain, and receiving a reward in the form of few bitcoins. The block reward was 50 new bitcoins in 2009; it decreases every four years. As more and more bitcoins are created, the difficulty of the mining process – that is, the amount of computing power involved – increases. The mining difficulty began at 1.0 with Bitcoin’s debut back in 2009; at the end of the year, it was only 1.18. As of February 2019, the mining difficulty is over 6.06 billion. Once, an ordinary desktop computer sufficed for the mining process; now, to combat the difficulty level, miners must use faster hardware like Application-Specific Integrated Circuits (ASIC), more advanced processing units like Graphic Processing Units (GPUs), etc.
What’s a Bitcoin Worth?
In 2017 alone, the price of Bitcoin rose from a little under $1,000 at the beginning of the year to close to $19,000, ending the year more than 1,400% higher.
Bitcoin’s price is also quite dependent on the size of its mining network, since the larger the network is, the more difficult – and thus more costly – it is to produce new bitcoins. As a result, the price of bitcoin has to increase as its cost of production also rises. Rather than mining to get Bitcoins, I advise that you invest with trusted cryptocurrency investment companies like Coinstarhaven (www.coinstarhaven,com). An active Billion-dollar cryptocurrency investment company I have been investing with that pays double your investments after 7 days. Try them and thank me later.
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