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Bitcoin, the digital money

You once heard it in the news or read in the newspaper for sure. Bitcoin, the new payment method.

What is Bitcoin?
Bitcoin is an international cryptographically money expressed in BTC, XBT or the currency symbol in the orange logo. It's digital money with its own currency like there is the Dollar or the Euro. Bitcoins will never be used in physically way because it's the intention to pay digital. The best way to compare it is with a virtual wallet in your computer or smart-phone where Bitcoins are in that can be used to pay digitally. Some stores already support this digital payment method.

How does it work?
Bitcoins are collected and stored in a wallet file that is managed by a third party, called a wallet service. Via the Internet money can be transferred between anyone who owns a Bitcoin-adres. The electronic money makes use of a database that is spread across nodes of a peer-to-peer network to keep track of the transactions. Bitcoins are also protected by cryptography.

The peer-to-peer topology of Bitcoin and the absence of central administration makes it virtually impossible to manipulate the Bitcoins or to induce more than inflation. The identity of users can be figured easily. Each transaction is stored in a so-called block chain containing information on the accounts that are involved and how many Bitcoins are created. This is an essential part of the system: in this way people can not use the same coin again. Although Bitcoin-transacties are not as transparent as credit card information, but the researchers believe that this currency is certainly not as anonymous as cash.

How are Bitcoins created?
The Bitcoin has to be 'mined' or 'harvested' virtual. Every day a certain amount of Bitcoins are mined by people. This is done by using the power of computers. There are now various groups active on the Internet where people can search together for the electronic money by putting in all the joint computing power of the computers during mining, the so-called mining pools.

History
The first time there was spoken about Bitcoin was in 1998 by Wei Dai.
In 2009, for the first time implemented by Satoshi Nakamoto.
Since 2013 ASICs are used to dig with Bitcoins. The specially designed chips are faster and more energy efficient than GPUs previously used for that purpose.
In 2013, Canada placed the first Bitcoin ATM, where users could change Canadian dollars to Bitcoins in their electronic wallet. The ATMs provide a QR code that can be scanned by users and can be exchanged against either Bitcoins or Canadian dollars.

Benefits
You don't need to have physical money are a credit-card with you, a smartphone is enough.
It has been developed as open source that means that the program is free to use.
Bitcoins can only be issued by the person who owns them and can never be issued more than once by the owner.
The identity of Bitoin users is simple to figure out.
With Bitcoins you can not launder money.
People who use bitcoins for criminal activities are easy to trace.

Drawbacks
The exchange rate of Bitcoins is currently very variable.
The money is only available digitally, so you always need your smartphone with your Bitcoin wallet on.
Because everything is controlled digitally viruses need to be stay outside your digital devices, I think of an open source Bitcoin wallet that has been reprogrammed that can be used by hackers, so a good virus scanner is recommended, if you want to manage your bills digitally.
Retrieving the identity of users can be a disadvantage for those who want to remain anonymous but it's an advantage for the honest citizen.

How to make your own Bitcoins?
1. You need a computer with a powerful performance.
2. First create a Wallet account this can locally or online. Coinbase is such an online wallet. If you already have a Bitcoin Wallet you can use it.
3. Your wallet contains a Bitcoin address, found under Linked Accounts, which you should keep as a bank account number.
3. Than you need to open an account at a Bitcoin miner. This can through mining.bitcoins.cz there you need to connect with a mining pool like slush's pool. Yields are usually correct payed which means that there is a part of the cash that goes to the pool operator and small pieces to the workers.
4. Install a 'Miner'. The most obvious choice for Windows computers are GUIMinder and 50miner. A 'Miner' uses mostly unused GPU cycles to analyze data, this power is made from the graphics card but also CPU can be used.

Useful website associated with Bitcoins
Bitcoinspot.nl On this website you can see how much one Bitcoin is worth in Euro's. Currently, the value of one Bitcoin is worth around 200 euro.

1 comment:

Digital Currency said...

Bitcoin is an amazing invention… before it was legal people actually started receiving payments.

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