What Is Bitcoin and How Do You Mine for It?

What Is Bitcoin?
Need money but hate visiting the bank? You may want Bitcoin. Unfortunately, this type of currency can be confusing and a little hard to understand when you’re new to the scene. Here’s what you need to know about the world of cryptocurrency and the basics of Bitcoin.

What is Bitcoin?

Bitcoin is digital money, also known as cryptocurrency. This means that all transactions must be completed online — you cannot pick up and hold this money in your hand. Additionally, because it is digital, it is easy to send to other people and use to pay for specific items. You can use this type of currency for many online purchases, provided that the retailer accepts Bitcoin as a payment option. However, these days, more individuals are interested in Bitcoin as an investment, rather than as a form of payment for their purchases.

How Much is Bitcoin Worth?

The value of Bitcoin is constantly changing — just like precious metals such as silver and gold. There is no set amount each Bitcoin is worth. Instead, its value is determined by individuals who bid on Bitcoin exchanges.

However, Bitcoins are valuable because they are limited. Only 21 million Bitcoins can be produced and more than 12 million have already be established.

How Do You Acquire Bitcoin?

Bitcoin can be confusing for those new to it. There is no bank, institution, or government body that distributes money. Instead, it is “mined.” What does it mean to mine Bitcoin? People do not physically mine for Bitcoins, like they would for gold. “Mining” simply refers to the verification of Bitcoin transactions.

Say Person A buys something from Person B with a Bitcoin. In order to ensure the Bitcoin is valid, miners begin to verify the purchase. With Bitcoin, all transactions are gathered into boxes with a virtual padlock, called “blockchains.” Miners use advanced computer software to find keys to open these blockchains. Once their computer finds it, the box will open and the transactions are verified. For finding this key, the miner gets 12.5 new Bitcoins.

Mining is no easy task though. It takes over one billion attempts for a computer to find the correct key. Although, if you aren’t a computer mastermind, you don’t have to mine Bitcoin to acquire it. You can buy this digital currency. There are many digital currency exchanges that allow you to not only purchase the currency but manage and store it as well.

How Do I Store My Bitcoins?

Since there is no bank and this digital currency is well, digital, storing and protecting it can be a challenge. Most individuals will store Bitcoins in a digital wallet. The wallet is basically a bank account for all your digital currency, and all information is stored in the cloud. However, there are many risks to this type of currency as the value of Bitcoin makes it a target for hackers. Because of their fear of the cloud, many individuals will also store their currency on their own computer, but this also has many risks if your computer crashes or is attacked by viruses.

How Do I Track My Transactions?

When you make a transaction with Bitcoins, it is completely anonymous. This means that your name and personal information is never attached to the currency. While this definitely has its advantages, it makes it easy for individuals to conduct criminal behavior such as purchase illegal materials and drugs online anonymously.

When Did Bitcoin Begin?

Bitcoin has been around for more than a decade. It was first introduced in 2008 by Satoshi Nakamoto. However, nobody truly knows who Satoshi Nakamoto is, even though there are many good guesses. Nakamoto invented the Bitcoin network and many of the rules and guidelines on how to mine the currency. Many individuals wonder why the creator of such a specialized project would avoid taking credit for the currency, but this type of invention comes with many risks.

Today, one Bitcoin costs thousands of dollars and if you complete a hash, your payment of 12.5 Bitcoins is equal to more than $100,000. So, if you are looking for a new investment or want to mine, Bitcoin may be the solution.

Make sure to check out other articles on the Sporcle Blog, like this one on Net Neutrality.