Bitcoin

What is Bitcoin?

Bitcoin is the first of a growing number of cryptocurrencies that leverage a distributed ledger called a blockchain to create a digital alternative to fiat currency.

Bitcoin

Amongst bitcoin’s primary goals were for it to be available to everyone, to not require any central authority’s permission to participate or clear transactions and to mathematically control the currency supply. Bitcoin is thought to be completely private, but this is a misnomer.

There are many cryptocurrencies, but Bitcoin is the most popular and currently, the most valuable.

Bitcoin overview

Token/Cryptocurrency/Symbolbitcoin (BTC) Ƀ
Current Bitcoin Price: 1 BTC to USD
6,709.00 USD 3.22%
First TransactionJanuary 3, 2009
FounderSatoshi Nakamoto
Official Websitebitcoin.org
AlgorithmSHA-256
MineableYes
Mining MethodProof-of-Work
Mining HardwareASIC

Who created Bitcoin?

Bitcoin’s creator is a bit of a mystery. Bitcoin was started in 2008 with a paper published by a person or group of people under the alias Satoshi Nakamoto. The currency itself launched in January of 2009, with the open source bitcoin client and the first coins being issued. This first “block” that was mined by Satoshi Nakamoto is referred to as the Genesis block and contained 50 Bitcoins.  There is ongoing speculation regarding the identity of the mysterious Satoshi Nakamoto.

Clearly Bitcoin’s release was purposefully meant as commentary regarding the financial collapse of 2007-2008. Within the Genesis block a hidden message was included. It read “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” referring to The Times of London’s lead story on that day.

What makes Bitcoin valuable? Why it it’s price so volatile?

Like any currency, the value of Bitcoin is based on supply and demand. There is no underlying asset that determines its value, in the same way that the US dollar is no longer based on a gold standard. When people around the world buy Bitcoin, the price will go up. When people around the world sell Bitcoin, the price will go down. This is done hundreds of thousands of times per hour, so the price of Bitcoin is always changing.

In terms of the “price” of Bitcoin, the other factor is the value of the currency that you are using to buy or sell in exchange for Bitcoin. For instance, if the underlying value of Bitcoin stays the same, but the US Dollar goes up, Bitcoin will appear less valuable. So in theory, Bitcoin could go “up” in China, but go “down” in the United States, even though Bitcoin itself remains the same.

What is bitcoin mining?

As with all crytpocurrencies, the term mining is used as the method by which new coins are put into circulation. The network releases new coins into the supply in return for mining computers providing computing power to the network. The computing power is used to validate transactions.

To prevent the network from being compromised mining computers must solve cryptography puzzles to participate. These puzzles require specific computer hardware, mining software and electricity. Putting a reasonable cost of participation helps create equilibrium and, at least in theory, a relatively level playing field.

At a regular interval, a bitcoin, known by the shorthand BTC is released to one of the miners on the network supplying computing power. Today just about all mining is performed by pools of miners working together to smooth-out volatility and normalize return.

What kind of hardware is best for mining BTC?

There was a time when mining BTC could be done with a variety of hardware. That time, however, has come and gone.

As bitcoin has gained popularity, and with that popularity miners, the only viable mining hardware today are application-specific integrated circuits, or ASICs. ASICs are specialized computers built to excel at a specific task. The difficulty in mining BTC combined with the introduction of ASICs has made all other methods of mining unproductive and unprofitable.