Bitcoin is an electronic pseudo-anonymous decentralized crypto-currency. That was a mouthful. But what does it actually mean? At the most fundamental level, Bitcoins are just a means of exchange. Just like shells, gold, dollars, or rubles. And just like silver, euros or stonestheir value hinges on an implicit agreement between the parties using them legal or informal. So it's just another currency. What makes them special then? They bitcoin history book as anotations on a very big ledger.
On page 33, of the book it might say: Hal - 3 bitcoins Philip - 9 bitcoins Wei - bitcoins When Wei decides to send Hal 2 bitcoins, it gets updated to: Hal - 5 bitcoins Philip - 9 bitcoins Wei - 98 bitcoins Who updates the book? Where is the book? Therein lies the beauty of bitcoin: The book bitcoin history book are all those who chose to participate. A good slogan could be:. When Moxie sends Runa a bitcoin, bookkeepers ask: Does Moxi actually own a bitcoin? Since the Big Bitcoin Book also contains the history of all transactions it can be checked: Moxie got 3 bitcoins from Jacob who in turn got it bitcoin history book Julian and Julian from John Ok, so it's verified!!
Moxie has the balance in his account according to the whole history of every transaction ever made. We can send Runa her bitcoin, update the ledger and add a transaction to the history. With about 2, transactions per hour and a growing history of 14 x 10 6 transactions you can see how the bookkeeping bitcoin history book get complicated: Every accountant on the planet must check the history, reach a consensus on the new version of the book and keep their book up to date.
This big book is actually called the " blockchain " and is about 5. The computers of the accountants are constantly calculating the transactions, comparing, and creating short unique summaries of previous book chapters called " hashes bitcoin history book.
For their hard work, bookkeepers also called miners are rewarded. Keeping the system running, safe and honest has a cost computers, electricity, knowhow so for every chapter closed 25 bitcoins are awarded to the bookkeepers proportionally to their efforts.
This bitcoin history book, won't last forever. In the reward will drop to Eventually only 21m bitcoins will ever be in circulation and bookkeepers will be compensated with small transaction fees. The protocol is too long to bitcoin history book here, but essentially doing all these calculations history checking, consensus, update, summarize is so difficult i.
For an attacker to defraud people by chargeback making a transfer and then getting the money back s he would have to buy enough computers to run a network half as strong as the accountants'. After spending all this money electricity bill not included the attacker can't even counterfeit new money, spend what s he doesn't have or bitcoin history book other people's transactions. The attacker could chargeback and stop the confirmation of other people's transactions, but not much else.
So the only incentive would be to undermine the trust of the network and devaluate the currency. The reality is more complex and dynamic: While Bitcoin was considered a passing fad nobody thought bitcoin history book stoping it or attacking it.
As it grows stronger and complex it becomes increasingly expensive to halt It would take 5 full years of Paypal revenue to buy such an IBM super-computer! The highly distributed nature of the bookkeeping and the fact that it involves a complex problem needing calculations is what makes the Bitcoin history book Book secure. In our naive example above we gave names to each entry on the book, but in reality all entries are anonymous.
Just like your bank account might be GB70 45 a bitcoin account will be identified by numbers and bitcoin history book The ledger will have entries like:. These addresses are public since all bitcoin history book and outgoing transactions are recorded on the ledger. But if you don't associate an email address, bank account or picture with the bitcoin address, it's anonymous. However, consider that paying with it online can leave many traces confirmation email, physical address, cookies, IPs.
So it's anonymous in the same sense that browsing online is anonymous Anonymous browsing can only be done with the right tools like TORVPN and the right precautions.
Why would anyone need anonymous payments? Why should Visa, Mastercard, Paypal, and many Governments not just your own know what you're purchasing and decide who you bitcoin history book fund for ex.
Think of an activist buying a forbidden book, bitcoin history book secure laptop or flight for an undercover journalist, medicine for that condition insurance companies shouldn't know about. Or perhaps something which is illegal today: It could be abortion, a gay magazine, a given medicine, drugs, weapons, bitcoin history book, gambling, services and a long etcetera depending on the country and period in history.
Bitcoin's anonymity has its fans and detractors: When the account is used anonymously bitcoin history book essentially cash which can be sent in a second around the world. This can obviously facilitate money laundering, and illegal activities like drug and weapon trafficking. However drugs, bitcoin history book and corrupt politicians seem to operate fine with regular currencies.
So it becomes a question bitcoin history book principle: Should governments be given unlimited power over the currency with risk of hyperinflation, bailouts and corruptionallowed to spy on all transactionsand continue with rampant tax evasion? Bitcoin is bitcoin history book not the solution to these issues, nor will it be a key enabler to crime.
It is just a currency with some interesting features on top: But will these features give birth to new currency paradigms? Bitcoin is a social and technological experiment. Its roots are in the cypher-punk movement with some libertarian and anarchist influences. Many are comparing the potential impact of this innovation with the creation of the Internet. If successful it would question the need for a money-printing bitcoin history book authority and become a universal currency.
The Bitcoin economy is growing fast. You can pay at restaurantsbuy foodingredientselectronicstravelaccommodationclothesservicesdrugspornblogsall major currenciesand a growing list of things.
However it still remains too technical, and niche for most. This, however highlights the potential growth for the value of the currency. It's a very crude estimate, of course, but it gives an order of magnitude. So in that scenario, a bread baguette would simply cost 0. From a purely practical point of view it's looking more attractive by the day: Chargebacks are not possible which protects honest sellers from fraudulent buyers. Exchange fees with other currencies say Bitcoins to USD can be as low as 0.
From the point of view of economics many questions remain unanswered. If the coins are limited and demand grows it will lead to deflation. When and how does it stop? Given the growing mis-trust from central banks, many savers are hoarding bitcoins. Will that be a problem? How liquid will this market be? For a more practical introduction on how to open a wallet, buy or get bitcoins see: Alvaro Feito is a theoretical physicist, co-founder at: The Big Book of Bitcoins, March
I have additional videos I can share privately about the company. Bitcoin is controlled by all Bitcoin users around the world. Nobody wants to use it, it's an exchange that seems purely for p and d.