The first time I came across the word bitcoin I had no idea what it meant. I searched and studied a while but still didn't understand the full concept of the crytocurrency called "bitcoin"
I know there's a whole lot of people who are still like I was so I decided to put together a write up very explanatory for people who would want to know more about Bitcoin.
>**What is 'Bitcoin'?**
Bitcoin is a digital currency created in 2009. It
follows the ideas set out in a white paper by the
mysterious Satoshi Nakamoto, whose true
identity has yet to be verified. Bitcoin offers the
promise of lower transaction fees than
traditional online payment mechanisms and is
operated by a decentralized authority, unlike
government-issued currencies.
There are no physical bitcoins, only balances
kept on a public ledger in the cloud, that – along
with all Bitcoin transactions – is verified by a
massive amount of computing power. Bitcoins
are not issued or backed by any banks or
governments, nor are individual bitcoins valuable
as a commodity. Despite its not being legal
tender , Bitcoin charts high on popularity, and has
triggered the launch of other virtual currencies
collectively referred to as Altcoins.
**Now let me Break It down**
Bitcoin is a type of cryptocurrency: Balances are
kept using public and private "keys," which are
long strings of numbers and letters linked
through the mathematical encryption algorithm
that was used to create them. The public key
(comparable to a bank account number) serves
as the address which is published to the world
and to which others may send bitcoins. The
private key (comparable to an ATM PIN) is
meant to be a guarded secret, and only used to
authorize Bitcoin transmissions.
**How Bitcoin Works**
Bitcoin is one of the first digital currencies to
use peer-to-peer technology to facilitate instant
payments. The independent individuals and
companies who own the governing computing
power and participate in the Bitcoin network,
also known as " miners ," are motivated by
rewards (the release of new bitcoin) and
transaction fees paid in bitcoin. These miners
can be thought of as the decentralized authority
enforcing the credibility of the Bitcoin network.
New bitcoin is being released to the miners at a
fixed, but periodically declining rate, such that
the total supply of bitcoins approaches 21
million. One bitcoin is divisible to eight decimal
places (100 millionth of one bitcoin), and this
smallest unit is referred to as a Satoshi. If
necessary, and if the participating miners accept
the change, Bitcoin could eventually be made
divisible to even more decimal places.
**Investing in Bitcoins**
There are many Bitcoin supporters who believe
that digital currency is the future. Those who
endorse it are of the view that it facilitates a
much faster, no-fee payment system for
transactions across the globe. Although it is not
itself any backed by any government or central
bank, bitcoin can be exchanged for traditional
currencies; in fact, its exchange rate against the
dollar attracts potential investors and traders
interested in currency plays. Indeed, one of the
primary reasons for the growth of digital
currencies like Bitcoin is that they can act as an
alternative to national fiat money and traditional
commodities like gold.
In March 2014, the IRS stated that all virtual
currencies, including bitcoins, would be taxed as
property rather than currency. Gains or losses
from bitcoins held as capital will be realized as
capital gains or losses, while bitcoins held as
inventory will incur ordinary gains or losses.
Like any other asset, the principle of buy low
and sell high applies to bitcoins.The most
popular way of amassing the currency is through
buying on a Bitcoin exchange, but there are
many other ways to earn and own bitcoins.
I believe I've been able to shed a little light on @bitcoin and how it works, if you have questions feel free to comment below.
@josefpius
hiveblocks