What is Bitcoin?

The following is a guest post from Tom Cat, owner of a website called UK Buy Bitcoins. If you’re interested in guest posting on Disease Called Debt, please get in touch.

Bitcoin is a form of digital currency that was brought to life in 2008. It’s founder, Satoshi Nakamoto, is still unknown, with many believing the name to be a pseudonym for a whole group of people.

Crypto-currencies such as Bitcoin, differ from traditional currency, as no central banking system is used at any point during a transaction. This means all transactions are not only free from credit card and banking fees; they’re also anonymous.

The Bitcoins are created and held electronically, so nobody actually controls the currency. Bitcoins are never printed in the way that Dollars and Euros are. Instead, they’re produced by a network of computers worldwide, which work to solve complex mathematical problems, essentially turning electricity into actual currency. This process is known among investors as ‘mining.’

When Satoshi Nakamoto set up the Bitcoin algorithm, a finite limit was set on the number of coins that could ever be released. No more than 21 million will ever be in circulation at any one time. Currently, 12 million Bitcoins exist, which means around 9 million are still left to be produced.

Those who have heard about Bitcoins prior to reading, which is probably most people now, will surely have heard of the term ‘mining.’ There’s a saying within the internet investing field, “Bitcoins are a real currency, but are mined like gold.”

The concept of mining may be confusing to some. In truth, the idea of mining is confusing to many, which is why most leave the theory and application to the more mathematically minded. In short, mining Bitcoin works like this:

Bitcoins are discovered, rather than printed. Traditional fiat money systems are subject to inflation, and currency devaluation, as governments and treasuries can simply print more to help ease national debt. Bitcoin isn’t. With Bitcoin mining, computers everywhere compete against each other to try and ‘find’ the next batch of valuable coins.

Records of each Bitcoin transaction are kept, allowing currency holders to keep track of who owns what. Each transaction is organized into a list, called a block. To ensure that the list stays unhampered with, all information it contains is run through a mathematical formula, giving it an entirely different appearance. This mathematical formula is known as a hash.

A hash is created using data from all transactions within the block, as well as data from the previous block, which assures legitimacy and that it’s in the correct order. Specialist software is used to create a hash, with the successful user receiving 25 Bitcoins.

As time goes on, Bitcoins become rarer to discover, and far more valuable, hence the huge increase in value seen over recent years.

In the past, Bitcoins have been an underground form of currency, used only by tech-lovers and lovers of the alternate. Recently, after an explosion of popularity, the currency has expanded out and is now used by mainstream civilians. It’s possible to use the form of payment to buy Subway sandwiches, a hair cut and even casino credits.

Author Bio: Tom Cat – On a mission to educate the masses on Bitcoin and show the best ways to use it instead of Fiat currency. Join the currency revolution now, and watch the way we use money change as you know it.

*Image sourced from Pixabay.