THE BITCOIN STORY FOR
IDIOTS
Caution: If u actually thinking of reading it
read till the END..... This is going to be new, and big news for you.
The
world of finance and economics is pretty complicated as-is, and now there’s
“digital money” in the mix making it even worse. BITCOIN is already everywhere
but, here in India we are still discovering, hearing, learning and getting to
know about it. There are a lot of questions about BITCOIN — starting with, what
the hell is all this? And so, here is the pretty much everything you wanted to
know about BITCOIN, but didn’t actually want to ask your tech-loving,
early-adopter friend who is going to be me by the end of this write up ;).
WHAT IS BITCOIN?
Associated
with the Silk Road- an illegal online black market that used Bitcoins as its
defacto virtual currency to enable regular folks to obtain all sorts of illegal
items easily and anonymously. The world of BITCOIN in 2013 was full of
drama, greed, controversy, conspiracy, crime, risk, and theft and speculated
wealth.
BITCOIN is
the worlds first and biggest decentralized digital crypto currency. When I say
biggest I mean it. Wait till you find out why.
A
crypto currency is digital money. It’s a virtual medium of exchange, not issued
by, backed by, or tied to any particular nation, government or bank. It is
the longest-standing, best-known, and most widely traded crypto currency.
BITCOIN, was launched in 2009 by a mysterious
person (or persons) known only by the pseudonym Satoshi Nakamoto.
There
is a difference between the term "BITCOIN" and "BITCOIN"
Bitcoin with a capital B means the software and the system itself. And,
"BITCOIN" with a lowercase b means the actual money or the digital
currency.
Unlike
traditional currencies, which are issued by central banks, BITCOIN has no
central monetary authority. Instead the system is peer-to-peer and transactions
take place between
users directly, without an intermediary. These transactions are verified by
netowrk nodes and recorded in a public distributed ledger called
"BlOCKCHAIN", which uses bitcoin as its unit of account. Blockchain
records ever single transaction of bitcoins in circulation. Bitcoins are
created as a reward for payment to the people who are constantly verifying the
blockchain, ensuring all the transactions that are being recorded in the public
ledger are correct. This process is called "MINING" and the people
behind this are called miners who are rewarded with transaction fees in the
form of newly created bitcoins to verify the transactions.
What is Mining
?
Mining
is the process of solving complex math problems (also called “hashing”) using
computers running Bitcoin software which require more computing power, so
people buy specialized Bitcoin machines or form groups that chain multiple
computers together to mine which is collectively called "CLOUD
MINING"
When
the program solves one of these problems, it creates “blocks,” or encrypted
Bitcoin transactions and when you solve a block, you are rewarded with
Bitcoins.
This
gets increasingly harder as more Bitcoins enter circulation. The rewards are
cut in half at regular intervals, which means there is a gradual slow-down in
the rate at which new Bitcoins are created. The total number of Bitcoins that
can every be mined are limited to 21milllion after which production will stop
completely.
A
single Bitcoin can be divided down to 8 decimals, and people can transact with
fractions of Bitcoins, known as santoshis, so even if one Bitcoin is worth a
lot, the system is still useful for very tiny transactions.The
blocks created by mining make up the transaction record of the Bitcoin system.
A new block is added to the blockchain once 10 minutes.
More
than 1.55 billion worth of bitcoins are currently in circulation around the
world of which 35,000 are in posession of Indians. Needless to say, the
popularity and usage of Bitcoin is picking up as more and more individuals are
becoming aware of its advantages.
As of this writing, 1
bitcoin = approximately USD $500. However, the bitcoin exchange rate is
intentionally highly flexible.
BITCOIN
pricing?
According
to M.T. Williams as of 2014, bitcoin has a volatility seven
times greater than gold, eight times greater than the S&P 500, and
eighteen times greater than the U.S. dollar. Attempting to explaining the
extremely high volatility which could be due to the following reasons:
1.
Due to insufficient liquidity,
2.
Uncertain Value and
3.
People are still experimenting with the currency and trying to figure out how
to use it.
The
price of bitcoin has gone through a lot of bubble and busts. In 2011 the value
of one bitcoin was UD$0.30 which began to rise in the latter half og 2012
reaching a wooping UD$266 on 10 April 2013 then crashed to UD$50. On 29th
November 2013, the cost rose to an all-time peak of UD$1,242. In the
following earth price fell sharply, to a little underUS$600. This
continued roughly till the end of 2015. According to the Wall Street
Journal, as of April 2016, bitcoin is starting to look slightly more stable that
gold priced at approximately US$500.
