So, what are bitcoins?
Bitcoin is a distributed peer-to-peer digital currency that can be transferred instantly and securely between any two people in the world. It’s like electronic cash that you can use to pay friends or merchants.
How are new bitcoins created?
New bitcoins are generated by the network through the process of “mining“. In a process that is similar to a continuous raffle draw, mining nodes on the network are awarded bitcoins each time they find the solution to a certain mathematical problem (and thereby create a new block). Creating a block is a proof of work with a difficulty that varies with the overall strength of the network. The reward for solving a block is automatically adjusted so that, ideally, every four years of operation of the Bitcoin network, half the amount of bitcoins created in the prior 4 years are created. A maximum of 10,499,889.80231183 bitcoins were created in the first 4 (approx.) years from January 2009 to November 2012. Every four years thereafter this amount halves, so it should be 5,250,000 over years 4-8, 2,625,000 over years 8-12, and so on. Thus the total number of bitcoins in existence can never exceed 20,999,839.77085749 and counting.
Blocks are mined every 10 minutes, on average and for the first four years (210,000 blocks) each block included 50 new bitcoins. As the amount of processing power directed at mining changes, the difficulty of creating new bitcoins changes. This difficulty factor is calculated every 2016 blocks and is based upon the time taken to generate the previous 2016 blocks.
Sites or users using the Bitcoin system are required to use a global database called the blockchain. The blockchain is a record of all transactions that have taken place in the Bitcoin network. It also keeps track of new bitcoins as they are generated. With these two facts, the blockchain is able to keep track of who has how much money at all times.
To generate a bitcoin, computers run specialized software. Because of how complicated the math needed to generate a bitcoin is, they must be calculated with very powerful processors. These processors can be found in CPUs, graphics cards, or specialized machines called ASICs. The process of generating the bitcoins is called mining. People who use their computers to mine Bitcoin, are paid with a small percentage of the bitcoins they generate.
A popular image associated with Bitcoin is a QR code. QR codes is a group of black and white boxes that are similar to barcodes. Barcodes have one dimension of information, while QR codes have two (horizontal and vertical). Barcodes are a row of lines, and QR codes are a grid of squares. Bitcoin uses QR codes because they can store a lot of information in a small space, and a camera such as a smartphone can read them. The two QR codes on the Bitcoin note are the public and private addresses, and can be scanned with a number of online tools.
Everyone in the Bitcoin network is considered a peer, and all addresses are created equal. All transactions can take place solely from peer to peer, but a number of sites exist to make these transactions simpler. These sites are called exchanges. Exchanges provide tools for dealing in Bitcoin. Some allow the purchase of Bitcoin from external accounts, and others allow trading with other cryptography-based currencies like Bitcoin. Most exchanges also provide a basic “wallet” service.
Check the existings exchanges HERE.
Wallets provide a handy way to keep track of all of a user’s public and private addresses. Because addresses are pseudo-anonymous, anyone can have as many addresses as they want. This is useful for dealing with multiple people, but it can get complicated to manage multiple accounts. A wallet holds all of this information in a convenient place, just like a real wallet would.
Check the most popular wallets HERE.
Bitcoin faucets are a reward system, in the form of a website or app, that dispenses rewards in the form of a satoshi, which is a hundredth of a millionth BTC, for visitors to claim in exchange for completing a captcha or task as described by the website. There are also faucets that dispense alternative cryptocurrencies. Most of them uses a microwallet system, a very simple way to gain and store your first satoshis for free.
Check the most popular microwallet systems HERE.
Bitcoin adoption and use continues to grow a lot every year. Since 2012, Bitcoin has gained the attention of the mainstream media; one way is the WannaCry ransomware created in May 2017. Adoption growth has not only happened for consumers, but also for many companies, who are looking to make use of all of the advantages of Bitcoin.
Source from Wikipedia, the free encyclopedia.