What is Bitcoin
So, what is Bitcoin, and how does it work?
Digital currencies are gaining momentum, and their popularity is boosted by a number of different factors:
– decentralization – there is no central bank to control it.
– anonymity – all transactions are private.
– crypto-currencies are cheap and convenient – it is instant, with low-cost transaction fees, and no debit/credit card or bank required.
Those advantages are clear, but do you know exactly what Bitcoin is?
“Bitcoin? What is it?”
Some people say that Bitcoin is like something in between gold and a dollar bill. It’s not quite a currency, rather a cryptocurrency (no one’s printing it), and it has elements of gold (its limited supply). It is called a “digital currency,” and it is only created and stored online. There is no single entity (governments or banks) to control Bitcoin. All transactions are made “peer to peer,” (i.e. from one individual to another) and all transactions are entirely anonymous.
Bitcoins are produced by several users running computer scripts all over the world; these scripts solve difficult mathematical problems and, once solved, an amount of Bitcoin is “released”. These mathematical problems ensure that transactions are anonymous, and it also gives rise to the term “cryptocurrency,” which is often used to describe Bitcoin. So, it is all math-based, and the process is called “mining”.
Bitcoin is used to buy products and services electronically, and there’s an increasing demand for Bitcoin in markets where anonymity and security is essential.
Bitcoin is decentralized
The best way to describe a Bitcoin transaction is to compare it with a typical “cash in hand” transaction from many years ago. When an individual buys an item from another individual with cash, there is no government record taken to know that this transaction ever existed. While all Bitcoin transactions are monitored on the “block chain,” much like cash payments, there is no record of the individuals involved in the transaction.
Bitcoin does not run through a central bank, and there is no “bank” that controls the money supply by printing or removing Bitcoin from the market. Bitcoin is produced through the mathematical problems mentioned above, and there is a limited supply that cannot be manipulated by anyone, anywhere in the world. The total amount of Bitcoins that will ever be produced is 21 million.
This lack of government or bank control means that seizures of Bitcoin are theoretically impossible. The impact that Black Friday had on the poker community many years ago will not be repeated, if players deal with Bitcoin.