What is a Bitcoin?
Bitcoin is a form of a crypto-currency that was introduced in 2009 by a programmer who went by the pseudonym of Satoshi Nakamoto. It is hailed as the first decentralized P2P (peer to peer) payment network that is powered by users with no central authority or middlemen. From a closer perspective, bitcoin is just like cash on the internet.
Where does it come from?
Unlike other forms of money that are present in some ‘real form’ , Bitcoins are not printed or minted in any facility overlooked by a government body. Bitcoines, like gold, is mined- just not through a shovel.
The mining process of a Bitcoin involves massive network of computers that use thousands of GPU’s or the more advanced ASICs to solve complex mathematical problems of the Bitcoin database.. A 16 digit code is then generated which confirms the discovery of a Bitcoin.
Just like Gold, it is finite and the upper limit has been set to 21 million Bitcoins.
What is means is that- Just like the value of gold keeps increasing due to the inflation in world economies, The value of Bitcoins will continue to soar. However, it is not clear yet as to what impact it’ll have on the miners as they’ll stop receiving the ‘block rewards’ that they do for finding out a Bitcoin Block and will have to depend on the transaction fees. Whether it’ll keep the miners solvent or not , will depend on how quickly they are able to reach the threshold and more importantly what technology might have been developed by then.
Right now the mining operation is backed by a heavy usage computer industry and there are many huge data centers opened throughout the world which work round the clock in hunt of Bitcoins.
How it works?
Bitcoins at its core have a simple data ledger file called the ‘blockchain’ which consists of three parts-
1) An identifying address (Approximately 34 characters)
2) History – A record of who has brought or sold it
3) A private key header log- This is the place where a sophisticated digital signature gets locked which confirms each and every transaction for that particular bitcoin file. Here a digital signature is captured that records every transaction.
The information of these transactions that are digitally tagged are publically disclosed that the ledger gets automatically updated throughout the world to prevent duplicacy of entries.
Once purchased, Bitcoins act just like gold in the pocket to enable a person to buy a commodity or hire a service of his choice where Bitcoins are accepted. They are stored In digital wallets which essentially is like a personal database that is stored within the device or on the cloud.
Why is it so special?
Of the many fascinating features of Bitcoin, the most popular one has been perhaps the Anonymity it offers. While the digital signatures are captured for record keeping, it does not mean that one has to reveal his own identity to use a bitcoin or store it in the wallet. While on can safely store a bitcoin in a system of his choice, the record of purchases pertaining to that Bitcoin is publically available.
This ensures transparency of the system while still maintaining anonymity of the user. Recently Bitcoin came under high scrutiny as the hackers who spread the ransomware virus demanded ransom in the form of BitCoin. Second reason that makes Bitcoin special is its dependability. Bitcoins are generally considered forgery resistant because they are so computationally intensive that creating them isn’t financially profitable.
Another very special feature of Bitcoins is its Tax-Free Nature. Unlike money transactions Bitcoins are generally not directly taxed but many governments are now trying to increasingly put efforts in taxing Bitcoins in one way or another by treating it not as a currency but as ‘a commodity’.
When will all Bitcoins be discovered?
Some reports suggest that over 2/3rd of all Bitcoins have already been Mined, experts say that over 80% of the Bitcoins will be mined by January 2018.
Following the Block creation primciples, the final block t hat contains Bitcoins would occur in 2140.
It may be discovered then or later but not before. This is in accordance with the block reward halving frequency of four years.
Who created Bitcoins?
In a world where people die for claiming credit, the creation of Bitcoin remains an exception. Satoshi Nakamoto is the name that has been used by the person or the group that created Bitcoin. No real person has so far come up proving himself to be the real Satoshi. However claims were made by Craig Wright, an Australian computer scientist that he is the real Satoshi. However, these claims are viewed with high skepticism and are considered debunked.
Before him, Newsweek reported that California-based engineer Dorian Nakamoto is the real Satoshi. However he refuted the claims and later collected funds t sue the publication. The importance of the creator remains prominent as there is a stockpile of mysterious 1.1 million Bitcoins that doesn’t move. It’s been there since the beginning and people believe that these are owned by the real creator who wanted to take advantage of mining the Bitcoins in the early phase when it was much easier.