To $20,000 & Beyond!
What is Bitcoin?
Bitcoin is an innovative payment network and a new kind of currency. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of Bitcoin is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.
Who Created Bitcoin?
The first Bitcoin specification and proof of concept was published in 2009 in a cryptography mailing list by Satoshi Nakamoto. Nakamoto left the project in late 2010 without revealing his identity. The community has since grown exponentially with many different developers working on Bitcoin. Nakamoto's anonymity often raised unjustified concerns, many of which are linked to misunderstanding of the open-source nature of Bitcoin. The Bitcoin protocol and software are published openly and any developer around the world can review the code or make their own modified version of the Bitcoin software. Just like current developers, Nakamoto's influence was limited to the changes he made being adopted by others and therefore he did not control Bitcoin.
Who Do People Trust Bitcoin?
Much of the trust in Bitcoin comes from the fact that it requires no trust at all. Bitcoin is fully open-source and decentralized. This means that anyone has access to the entire source code at any time. Any developer in the world can therefore verify exactly how Bitcoin works. All transactions can be transparently consulted in real-time by anyone. All payments can be made without reliance on a third party and the whole system is protected by heavily peer-reviewed cryptographic algorithms like those used for online banking. No organization or individual can control Bitcoin, and the network remains secure even if not all of its users can be trusted.
Is Bitcoin a Bubble?
A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for Bitcoin's price to fluctuate as the market seeks price discovery. Reasons for changes in sentiment may include a loss of confidence in Bitcoin, a large difference between value and price not based on the fundamentals of the Bitcoin economy, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed.
How Does Bitcoin Work?
From a user perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them. This is how Bitcoin works for most users. Behind the scenes, the Bitcoin network is sharing a public ledger called the "blockchain". This ledger contains every transaction ever processed, allowing a user’s computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, allowing all users to have full control over sending Bitcoin from their own account. Additionally, anyone can process transactions using the computing power of specialized hardware and earn a reward in Bitcoin for this service. This is often referred to as "mining". To learn even more about Bitcoin, please read the Bitcoin Foundation Manifesto found here.
Who Owns & Operates the Bitcoin Network?
No one person or group owns the Bitcoin Network. Bitcoin is controlled by all Bitcoin users around the world. While developers are improving the software, they can’t force a change in the Bitcoin protocol because all users are free to choose what software and version they use. In order to stay compatible with each other, all users need to use software complying with the same rules. Bitcoin can only work correctly with a complete consensus among all users. Therefore, all users and developers have a strong incentive to protect this consensus.
How Are Bitcoins Created?
New Bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin Miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange. The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business. When more miners join the Network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow. Bitcoins are created at a decreasing and predictable rate. The number of new Bitcoins created each year is automatically halved over time until general issuance halts completely with a total of 21 million Bitcoins in existence. At this point, Bitcoin Miners will probably be supported exclusively by numerous small transaction fees.
Frequently Asked Questions & Answers were Derived from the FreeBitco.in Website