Bitcoin 101: What is Bitcoin?

Posted on March 30 2015

Bitcoin was invented as a peer-to-peer system for online payments that does not require a trusted central authority. Since its inception in 2008, Bitcoin has grown into a technology, a currency, an investment vehicle, and a community of users. 

What is Bitcoin?

Since anything digital can be copied over and over again, the hard part about implementing a digital payment system is making sure that nobody spends the same money more than once. Traditionally, this is done by having a trusted central authority (like PayPal) that verifies all of the transactions. The core innovation that makes Bitcoin special is that it uses consensus in a massive peer-to-peer network to verify transactions. This results in a system where payments are non-reversible, accounts cannot be frozen, and transaction fees are much lower.

We understand that bitcoin can seem a little imposing at first, so if you want an explanation that even a five year old can understand, click here.

Where do bitcoins come from?

Although we don't want to go into the process of "mining" or how bitcoins are created, here is a simple explanation: Some users put their computers to work verifying transactions in the peer-to-peer network mentioned above. These users are rewarded with new bitcoins proportional to the amount of computing power they donate to the network.

 

Who controls Bitcoin?

As we mentioned above, there is no central person or central authority in charge of Bitcoin. Various programmers donate their time developing the open source Bitcoin software and can make changes subject to the approval of lead developer Gavin Andresen. The individual miners then choose whether to install the new version of the software or stick to the old one, essentially “voting” with their processing power. It is in the miners’ best interest to only accept changes that are good for the Bitcoin currency in the long run. These checks and balances make it difficult for anyone to manipulate Bitcoin.

 

1 comment

  • Jubanord: October 20, 2015

    I think Ray understands this cpcneot, however like everyone who is watching our evolutionary progress. We always experience a blind spot in our development, both monetarily and biologically. An almost miniature event Horizon. It’s hard to imagine where we go from here due to the inevitable currency war, Cryptocurrency battling the near obsolete Fiat system . It could last quite some time, or it could be an unbelievably fast and dramatic event. Either way, we have come upon an uncertain and quite exciting time in history. On a personal note, I have to say, like all things in our global economy any new monetary policy takes a lot longer to implement than anyone anticipates. However, when an event does occur it happens fast and in a big way. So I’m leaning towards something big happening well before my life is over. Lets invest in Bitcoin and go for the ride. Even if it goes nowhere at least you can collect a few souvenirs along the way. I have to say even if my initial investment in Bitcoin is a flop, at least I was a part of history. Not just any history either, but the most fascinating history story still in the making. To be a part of any groundbreaking technology is one of those I was there kind of moments. I think Bitcoin is merely a beta test for the future of our economic structure. Regardless, I have no quarrels of using Bitcoin as an investment vehicle. It could even facilitate as a transition currency to a new stable system that could propel our species into a globally prosperous Neo-Renaissance Era Or the other side of things is we could all perish I think not.I believe the human race still has a natural survival instinct and we will figure out a way to put our petty ways behind us. We will inevitably move on to a better way of life for the whole world. We always have tried, but I think the age of realism is here. The internet is creating a world of no BS. The unjust, evil ways of our past are being eliminated. Old ways of thinking, like always, become obsolete.Sorry for the rant but I’m ready for something new. I think everyone is, well everyone with a heart anyway.

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