What is Bitcoin
Bitcoin is an electronic cryptocurrency. The origin of bitcoin dates back to 2008, when a paper written by Satoshi Nakamura laid out the design for the new currency.
How does bitcoin work? Bitcoin is a digital peer to peer electronic currency. In other words, people can receive and send bitcoins to and from anyone on the network. There is no central authority or intermediary involved. Whenever a transaction takes place, it is broadcast to the entire network, and added to an electronic ledger known as the blockchain.
As the blockchain grows and transactions are verified, new bitcoins are generated. When the bitcoin network was first launched, new bitcoins were generated at the rate of 50 coins per block. This rate is halved every 4 years until it finally reaches 0 in the year 2140. At that point there will be 21 million bitcoins in existence.
The process of creating new bitcoins is known as bitcoin mining and involves solving extremely difficult mathematical problems. This difficulty increases over time. Some enthusiastic miners have created mining rigs that are devoted solely to mining coins. There are even companies now which sell nothing but bitcoin mining gear, such as Butterfly Labs. With bitcoins currently trading at $106 per coin, you can understand the attraction bitcoin mining has.
Tomorrow I will discuss the pros and cons of bitcoins, how they can be obtained and what the future may hold for bitcoin.