What is bitcoin?
Bitcoin is the proclaimed money of the Internet. It is based on an open source protocol (think about it like peer-to-peer software like Bittorrent) developed in 2009 by a person or group of people calling themselves Satoshi Nakamoto.
Who creates bitcoins?
Instead of being issued by the Federal Reserve, a decentralized network of computer servers creates new bitcoins at a gradually decreasing rate pre-determined by the original source code. At the current rate, a new “block” of 25 bitcoins is created roughly every 10 minutes.
The servers, known as "bitcoin miners," perform highly advanced mathematical calculations to crack a series of codes. The first to crack each code gets to "mine" the next block of bitcoins. The same server network authenticates every transaction performed in bitcoins and post it to a public, online ledger.
How many bitcoins are in circulation?
More than 12 million, according to the ledger, the Blockchain. As more bitcoins are created, the codes get tougher, and the rate at which new bitcoins are created slows accordingly.
There will only ever be 21 million bitcoins. The cycle will take decades to run its course, at which time 6,929,999 blocks will have been generated.
Where can I buy bitcoins?
Bitcoins are bought and sold on a variety of exchanges or through a brokerage, such as San Francisco-based startup Coinbase, that measures the price of one bitcoin against the value of other currencies. Coinbase allows users to link their bank accounts to the service and acquire the digital cash.
People can transact in whole bitcoins, or in smaller amounts called satoshis. You can think about satoshis as cents. They’re equal to 0.000 000 01 bitcoin.
About the Author
