What exactly is Bitcoin?

The financial crisis, which led to the discredited of central banks and financial institutions, has been the driving force behind the development of alternative currencies, with the idea of creating a widely accepted new currency that is relatively stable and is not affected by inflation by controlling the money supply. Bitcoin is such an attempt.

How to create a new currency (mining)?

The answer is simple, pick a stone, and then convince everyone that this can be used to change things, and then motivate more people to join in together. But in the process to let everyone agree is not a simple thing, gold at the beginning is only a stone, it was finally people as money after hundreds of years of time.

Bitcoin was created in 2008-a lucky time, because it was just the first year of the financial crisis, and the traditional currency credibility was impaired. It was designed by Ben Cong, a pseudonym, and probably a bunch of other designers. They designed a complex algorithm, you use the computer to crack it will produce Bitcoin (that is, the so-called mining), when your computer completed a certain task, a new bitcoin will be created.

At first these jobs are easy to accomplish, so you can quickly produce a stack of Bitcoin with your notebook. But they are smart enough not to allow money to be created indefinitely, because if that is the case, it is an infinite amount of inflation. As more and more Bitcoin are created, your computer will need to do more to create new Bitcoin, and eventually the total amount of Bitcoin will be limited to 21 million pieces by 2040.

So the people who start with Bitcoin are lucky that they can easily get bitcoin, and when more and more people want to, the price of bitcoin goes up and they send it.

How does the bitcoin work?

The most important characteristic of a digital currency is that its ownership can be certified so that money cannot be spent two of times. You can use a central system to authenticate, but Bitcoin is not like this, it does not have this central system, but through Peer-to-peer system to authenticate, like BT download network.

For example, when you transfer money, the Bitcoin network will open an authentication program, the transaction history of the Bitcoin and the system of different nodes (that is, the computer with the Bitcoin client), the transfer will only occur if the nodes agree.

A bitcoin itself is a combination of numbers and letters, with no entities. If the code is wrong, verify that the money is gone; If you delete the wallet file or forget the password, the money is gone.

How to buy and sell Bitcoin?

First you need a Bitcoin wallet that can be downloaded to your computer by downloading a Bitcoin client, or you can use an online service to save it on the Internet. You will be able to buy and sell Bitcoin, usually through Mt.Gox and bitcoin China's big exchanges.

How much is the value of a bit?

When I write this article, the price of a bitcoin is 4448 yuan. However, when the bitcoin system was just on line in January 2009, its value was close to 0, and in September 2010 the price was less than 0.1 dollars. It was not more than $1 in February 2011, and rose to $27 in three months, after Mt.Gox and Mybitcoin were black and plunged to 3.5 dollars. This year it has risen, to the present price.

What can I buy with Bitcoin?

In foreign countries, like ebay's Bitcoin shopping site called Bitmit, you can buy things on it. There is also the seizure of silk Road, which can buy a variety of illegal drugs. WordPress can pay with Bitcoin, and recently Baidu has also announced its support for Bitcoin. In general there are more and more places to support Bitcoin payments. But now most people are not going to use Bitcoin to spend, generally waiting for it to increase prices and then set up.

The advantages and disadvantages of Bitcoin

Advantage:

Transactions are anonymous and therefore cannot be traced or taxed

will not depreciate because of inflation, its algorithm will actually encourage deflation

Generally no transaction costs

Can be used to buy things

The certification system is trustworthy and can verify your ownership

Disadvantage:

Like the dollar and the renminbi, it has no intrinsic value, and if they don't, they're worthless.

Bitcoin is not suitable for face-to-face transactions, because every time you make a transaction it takes about 10 minutes to wait for the system to authenticate, and that time will only grow longer in the future.

Like a cash purse, if Bitcoin's wallet is lost, the money is gone.

Trading anonymity is also bad, resulting in the most use of bitcoin is fraud, money laundering, black market and other illegal transactions, now a more speculative.

Money is an illusion.

Money is an illusion-but as long as everyone has this illusion, it is useful. In the past, the dollar represented gold, and the government promised that you could convert it to gold at any time. But the US abandoned the gold standard in 1971, and that assurance vanished (so please don't call it dollars). We are still using the dollar, just because of long-standing habits, traditions and government support. If all of a sudden they don't recognize the dollar, it becomes a pile of waste paper. This is true of all currencies in today's world, including Bitcoin.

Summarize

Bitcoin as a technology (its algorithm and system) is indeed a new thing, but as a currency its birth process and other currencies, just started worthless, as everyone's recognition of it gradually increased, value will follow. The process may have been thousands of years ago, but in the internet age, it may not take long to achieve. So, if we all talk about Bitcoin, then bitcoin wins.

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