What is Bitcoin?
Bitcoin is a digital currency. A coin (or fraction of a coin) exists only in relation wallets that hold them. A wallet is a long string of numbers and letters called a “Private Key”. You also have a “Public Key” which is the receiving address. If somebody finds your private key, then all coins in your wallet are at risk for theft.
Private keys / wallets are either stored on a website/cryptocurrency exchange or they are stored on a piece of software on your computer. A private and public key pair is generated by a very complex algorithm and mathematical equation. It’s impossible to know what a private key is looking at the public key alone. Therefore, the public key is what you give to somebody when you want him or her to send you coins.
Bitcoin is created through “mining”, which is a process of a computer solving a very long math question, or playing a very long number guessing game. When the correct number is guessed, the person(s) who guessed the number receive a block of Bitcoins. This reward started out really high in 2008, and it’s cut in half every 4 years. Eventually, in 100+ years, there will be no more reward. However, miners will still receive benefit from mining, which will then be solely to verify transactions.
When you send coins to a friend, you send a message out to all miners, “I want to show the receiving address that I have coins to send.” The computers cross-reference your public address with the “ledger” – a historical document that shows every transaction that was ever made to see that, at some point in the past, you were given coins from another address and therefore you have enough to send.
This creates decentralization. All computers on the network have equal say. And, unless more than half of the computers got together to say otherwise, it’s impossible to change how Bitcoin works. Therefore there’s a lessened chance that major organizations or governments can get in the way and call the shots. Bitcoin is also set-in-stone in terms of how many coins there will be in the future; there will only ever be, at the very most, 21 Million coins. (The actual number will be a lot less after factoring in how many coins were lost or destroyed.)
The Bitcoin economy/market is explained by supply and demand. Years ago, only a small group of people saw value in Bitcoin, therefore it was ‘practically free’. As more people get onboard, this creates a demand (in which there’s an inadequate supply) which pushes the price higher. There is a cap how much each coin can be worth, and some hypothesize that this could potentially be over a million dollars, but it’s impossible to predict. Some say that the belief that Bitcoin will be worth so much is what’s driving the price high and causing a “bubble” which is a hyper-inflated market not truly worthy of its value over time. Either way, most believe that whether or not this is a bubble, Bitcoin has a lot of room for growth.
Now that you know a bit about Bitcoin, why don’t you download the free guide: “Bitcoin Investing For Beginners”? This document will go into a good introductory investing strategy to get coins in your wallet every week or month. Bitcoin represents a major possibility and implication for the financial future… and some even say, “We’re still only in the beginning.”
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