INTRODUCTION
Bitcoin is a digital monetary system. Instead of “dollars,” the unit of currency is referred to as a “Bitcoin.” Like traditional money, bitcoins can be used to store and transfer value among other bitcoin users within the bitcoin community. Bitcoin is considered a cryptocurrency. The currency utilizes cryptography for management and creation of the currency.
There is a bitcoin protocol, which resides primarily on the internet. It’s possible to utilize the protocol on your smartphone, computer, tablet, and other computing devices. It’s easily accessible to anyone with common available technology.
Essentially, anything that can be done with conventional currencies can be done with bitcoins. It’s possible to buy and sell goods and services, give money to other individuals or organizations, or even provide credit to others. Bitcoins can be bought, sold, and exchanged for other currencies.
Bitcoin is considered by many to be the ideal currency. It’s secure, free from borders, and very fast.
Bitcoins are virtual. There are no physical bitcoins to be found anywhere in the world. The bitcoins are merely an idea to convey value. All that’s required is that other bitcoin users accept the same premise.
Interestingly, bitcoins are a peer-to-peer system. There is no central authority, computer server, or control point.
HISTORY
As with the founding of Facebook, the history of bitcoin is a little fuzzy, but these are the high points:
- In 2008, someone named “Satoshi Nakamoto” published a paper titled, “Bitcoin: A Peer-to-Peer Electronic Cash System.” To the best of anyone’s knowledge, the author’s name is an alias. It has even been suggested that several people wrote the article.
- The premise combined the previous technologies and philosophies of HashCash and b-money. The idea was to create an electronic monetary system that was completely decentralized.
- The primary innovation was a global accounting process that would take place every 10 minutes. This would allow the entire network of users to reach a consensus regarding the previous 10 minutes of transactions worldwide. The advantage of this process is the elimination of users double spending their currency.
- Previous attempts and electronic currency dealt with the double-spend issue by clearing transactions through a centralized clearing system. This is considered a weakness because a centralized location could be hacked.
- The actual bitcoin network was launched in 2009. The first issuance of bitcoins was 50 coins. The value of the coins was negotiated by the users at that time.
- The first notable transaction was 10,000 bitcoins for two Papa John’s pizzas. The transaction was indirect and did not include Papa John’s as one of the involved parties. The first bitcoins weren’t worth much!
- There has only been one significant exploited vulnerability. In 2010, 184 billion bitcoins were created. The transaction was quickly noticed, reversed, and the flaw was removed from the system.
- By the beginning of 2013, over 1,000 merchants were accepting bitcoins as payment. Many charities also began accepting bitcoins for donations. The Internet Archive gave employees the option to receive their salaries in the form of bitcoins.
- Bitcoins have ranged in value from less than a penny to over $1,200. The value of a bitcoin is very volatile. The value in November 2015 was roughly $400. Who knows where it will be in a few months?
- The first government seizure of bitcoins occurred in June of 2013. The DEA seized 11.02 bitcoins as part of a raid and listed the bitcoins as a seized asset.
- Also in 2013, Vancouver, Canada became the location of the first bitcoin ATM. The ATM allowed the purchasing of bitcoins.
- Many larger companies are now accepting bitcoins. These include Overstock, Zynga, and several Las Vegas casinos. There is even a bitcoin financial product on the U.S. Commodity Futures Trading Commission.
Bitcoins have a somewhat shady history. If you recall, the infamous Silk Road drug website relied on the use of bitcoins. However, the use of bitcoins is becoming more accepted, and even mainstream companies are now getting involved. Even the US stock market has investment options for those interested in bitcoins.
“I do think Bitcoin is the first [encrypted money] that has the potential to do something like change the world.”
– Peter Thiel, Co-Founder of Paypal
Bitcoin and other Cryptocurrency
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