Bitcoin is a digital, peer-to-peer currency which can be used to purchase products and services electronically. It can only be created and stored electronically, there are no notes or coins.
Who controls Bitcoin?
Bitcoin is decentralised – no single country, organisation, institution or person operates it (even the founder has no control). Unlike other forms of digital currency which is stored by banks & PayPal etc. and transferred using electronic payment gateways, Bitcoin is solely distributed between users. This means no one has control of your money except you.
Who invented Bitcoin?
Bitcoin was the first cryptocurrency (a category of money). It was released in 2009 by “Satoshi Nakomoto”. No one knows who or what “Satoshi Nakomoto” is, but he/they placed a white paper on the Internet that explained how a peer-to-peer electronic currency would work.
How are Bitcoins created?
Bitcoins are created by computer power in a distributed network. This process is called mining – computers generate blocks which are used to process and verify Bitcoin transactions between the time the block was created and the time previous block was created. Each block contains information about the previous block and is added to the blockchain. The blockchain contains information on every transaction (a ledger of all Bitcoin transactions). Generating a block requires a lot of computing power, so for this reason miners who successfully generate a new block are rewarded Bitcoins for their efforts. The current reward is 25 Bitcoins.
Is there a limit for the number of Bitcoins that can be in circulation?
At the time of writing there were 12 million Bitcoins in circulation. For Bitcoin to retain it’s value there is a cap of 21 million Bitcoins that will be made available for circulation. In addition to the cap, Bitcoins are introduced gradually to prevent the market from flooding – this is achieved by halving the reward every 210,000 blocks. It is estimated that the last block will be generated in the year 2140.
Why should I use Bitcoin?
There are many advantages to using Bitcoin over your normal currency.
- It’s decentralised – There is no single country or organisation or individual that owns the Bitcoin network. The network is made up of the computers that mine Bitcoins whilst processing and verifying transactions. This means that no one can prevent access to your money like the Bank of Cyprus did in 2013. And the network has no single point of failure and will always be online, unlike banks and companies that suffer from online outages.
- It’s global – You can use your Bitcoins globally without the need of exchange rates, exchange fees or changing it into another currency. Also, the value of Bitcoin, just as Gold, is not impacted by the global economy as no country or bank manages the value of it.
- Minimal transaction fees – Since transactions are between users, it’s free to send Bitcoins from your wallet to another users wallet. In the future there will be a minimal transaction fees for miners/workers (once the network rewards stop), but this will be significantly less than traditional money transfer fees.
- It’s fast – You can send Bitcoins across the globe in minutes!
- It’s anonymous – Anyone can have multiple Bitcoin addresses without providing any personal information or ID.
- It’s transparent – Every single transaction is stored in the Bitcoin blockchain, which can be viewed by anyone by using a blockchain explorer/viewer.