To understand Bitcoin, it would probably take a lot more than a 600 word article written at 11pm on a Tuesday night after researching the strange phenomenon of online currency for weeks fuelled by late night instant coffee, my curious nature and a love for technology. I don't fully understand it but I have done enough research now to feel comfortable explaining it in word. It is something I feel should be understood because it could very well change the way we think of money in the future or present, depending on how strongly you believe in Bitcoin.
A mythical figure that goes by the name Satoshi Nakamoto first appeared online in 2008, speaking of crypto-currencies, e-money and computer code that gave very little away about his personality but gave those who dealt with him a very clear vision as to how literate he was in the world of computer language. Satoshi could be a man, Satoshi could be a woman, for all we know, Satoshi is a group of people living under a pseudonym to protect their identities and maintain anonymity online. As with everything nowadays, there are theories and there was an investigative journalist who claims to have found Satoshi Nakamoto in California but as for now, it is unconfirmed with questions being asked.
Nakamoto contacted Hal Finney, another computer programmer, and made the first bitcoin transaction in 2009 and once the online currency had been implemented, Nakamoto started to slowly disassociate himself with the online forums that he had been posting on and in 2011, posted his last message online. Since then, Bitcoin's value has risen to unforeseen values and many reputable online websites now accept it as a form of payment for goods and services. And as we know from Homer J. Simpson, money can be exchanged for goods and services ergo, Bitcoin is officially money now.
The reason for Bitcoin is open to interpretation. Many people believe it is an anti-establishment move given the lack of trust that people now have in central authorities and banking institutions. Bitcoin works just like any other currency except for the fact that it is all digital and as I said, there is no central figure who is entrusted to take care of it. Any of the day to day activities that are generally taken care of by the bank are taken care of by members of the online bitcoin community. The trust that is required to give the bank your money is not required in the world of Bitcoin. Bank charges and fees are non existant.
It's value began to soar in 2013 and reached it's peak value of $1,238 in December of the same year. You must remember that bitcoin started being traded for less than a dollar. you might also wonder why more people aren't buying it. Well, for a start, since Bitcoin started being traded, its fragility has been questioned and now that the price is soaring, people are waiting for the collapse. One Bitcoin now costs around $600 dollars but by the time this is published, that number might change again by hundreds, given the volatile nature of the crypto-currency. Just a note, there were people who bought pizzas, socks and other items for 3 bit coins that would now be the equivalent of $1,800 dollars. Crazy, huh?
You might ask? What exactly is it then? This comes down to a set of carefully set out algorithms and code that releases a certain amount of Bitcoin at different times onto the web and into your digital wallet, this is called "mining". the last set of bit coins are set to released in 2041, by then we are not quite sure just how Bitcoin will have evolved. The fact that bitcoin is a limited resource gives it it's value because as we know, if it was unlimited then it would have no value. Duh!
In order to keep track, you need to have some form of documentation or ledger, right? Well, they have what is called a "block chain". You can check out realtime block chains at blockchain.info. Basically, you spend your bit coins (there are more and more websites now accepting bit coins as a form of payment), it goes into the system and the algorithm takes track of that, subtracts your bit coins in the next block chain from you account or wallet and the next "block chain" begins. The code for each block chain is unique and impossible to crack so this is what makes Bitcoin somewhat secure, although theft of bit coins is still possible.
There is a lot to know about how it works and unless you are a computer programmer, you shouldn't really get into it too much because it really will fry your brain but the basics are all here. It is a decentralized digital currency created by an enigmatic figure who was, supposedly, pissed off with the way banks operate. You don't have to invest or get involved but it would be wise to keep your eye on The Rise of Bitcoin (and fall, possibly) because its legacy is being created as we speak.