Bitcoin Facts You Should Know
Bitcoin Is Programmable Money. Bitcoin and other cryptoassets operate under the same philosophy as past monies. What determines money is a shared set of rules for exchanging value. The main difference with digital currency is that the rules are determined by the payer and payee. The terms and conditions of the transactions are codified. This system will, and has started to, extend beyond cryptocurrency and ultimately allows for a huge array of transactions including contracts, expertise, assets and services.
We have physical forms of money such as goods and paper money in the analog world, which are limited by distance. In the digital world, we gained further reach with our transactions, removing the constraint and dependency of human distance and speed. But have to mention, that in the digital world, we are governed by the speed and mercy of banks. In the crypto world of programmable money, we eliminate both human and institutional constraints. These tensions are expensive and reduced.
Bitcoin Is Not Created Out Of Thin Air. Bitcoin is created in a process called mining. The technology that bitcoin is built on top is called Blockchain. It is dependent on a network of nodes that ensures the integrity of transaction history by achieving consensus. The necessary part of the process is validation. After transactions validation, the nodes then need to race, using trial and error, to solve a difficult mathematical puzzle that requires heavy computing resources. The first computer, that solves the equation in the network will be rewarded with bitcoins. The process is called ‘ bitcoin mining’. This protocol is referred to as Proof of Work (PoW).
There are two purposes for Bitcoin mining: it allows for the creation of new coins and facilitates the processing of transactions in the network. It takes energy and hardware for mining. If you try to mine bitcoins on your computer, you will find the cost of electricity will likely outweigh the value of bitcoins you can mine. The Proof of Work protocol is also used by other cryptocurrencies.
Bitcoin Has Value. There are 21 million bitcoins, that can be ever mined, which is deflationary and the opposite of paper money which is inflationary. The security of Bitcoin and its value is derived from the fact that it is easy to prove that substantial computing power and electric energy was expended to solve a math puzzle. This helps to fight against fraud. In case if bitcoin is created by PoW, the mining is authenticated and backed by a verifiable network.