What exactly is Bitcoin?

The financial crisis has led to the prestige of central banks and financial institutions. This has become the driving force for people to develop alternative currencies. Their idea is to create a widely accepted new currency that is relatively stable and does not control the money supply. Affected by inflation. Bitcoin is such an attempt.

How to create a new currency (mining)?

The answer is very simple. Just rub a stone and then convince everyone that this can be used to change things, and then motivate more people to join in. But in this process, it is not a simple matter for everyone to recognize. Gold was only a stone at the beginning, and it was finally used as money for hundreds of thousands of years.

Bitcoin was born in 2008 —— a lucky time, because it was just the first year of the financial crisis, the traditional currency reputation was damaged. It was designed by Nakamoto Satoshi, which is a pseudonym, and probably a group of other designers. They have designed a complex algorithm. When you use a computer to crack it, it will generate bitcoin (also known as mining). When your computer completes a certain task, a new bitcoin will be created.

Initially these tasks were easy to accomplish, and you can quickly produce a bunch of bitcoins with your laptop. But they are very smart and can't make money infinitely created, because if you do this, it will become unlimited inflation. As more and more Bitcoin is created, your computer needs to do more work to create new bitcoins. Eventually, by 2040, the total amount of Bitcoin will be limited to 21 million.

So people who have Bitcoin at the beginning are lucky, they can easily get Bitcoin, and when more and more people want it, bitcoin prices will rise and they will be sent.

How does Bitcoin work?

The most important feature of digital currency is that its ownership can be certified so that money cannot be spent twice. You can authenticate with a central system, but bitcoin is not like this. It does not have this central system, but is authenticated by a P2P system, like the BT download network.

For example, when you transfer money, the Bitcoin network will open an authentication program. The transaction history of this bitcoin will be compared with different nodes in the system (that is, computers with Bitcoin clients). Transfers will only occur if the individual nodes agree.

A bitcoin itself is just a combination of numbers and letters, no entity. If the code is wrong, the verification will not be done, the money will be 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 the Bitcoin client, or you can use the online service to save it online. Once you are done, you can buy and sell Bitcoin, usually through large exchanges such as Mt.Gox and Bitcoin China.

What is the value of a bitcoin?

When I wrote this article, the price of a bitcoin was 4,448 yuan. However, when the Bitcoin system was first launched in January 2009, its value was close to zero, and by September 2010, the price was still below $0.10. It was not until February 2011 that it exceeded the price of $1, and it rose to $27 three months later. After Mt.Gox and MyBitcoin were hacked, it plummeted to $3.5. This year it has risen sharply and has reached the current price.

What can I buy with Bitcoin?

In foreign countries, there is a bitcoin shopping site like eBay called Bitmit, which you can buy on. There is also the sealed Silk Road, where you can buy all kinds of illegal drugs. WordPress can pay in Bitcoin, and Baidu recently announced support for Bitcoin. In general, there are more and more places that support bitcoin payments. But now most people are not planning to use bitcoin to spend, generally waiting for it to raise prices and then cash out.

Advantages and Disadvantages of Bitcoin

Advantages:

Anonymity in trading, so it cannot be tracked or taxed

Will not depreciate because of inflation, it Algorithms actually contribute to deflation

Generally no transaction costs

can be used to buy things

The authentication system is trustworthy and can verify your ownership

Disadvantages:

Like the US dollar and the renminbi, it has no intrinsic value. If others don't want it, they are worthless.

Bitcoin is not suitable for face-to-face transactions because you do every transaction. It takes about 10 minutes to wait for the system to be certified, and this time will only get longer and longer in the future.

Like a wallet with cash, if the bitcoin wallet is lost, the money is gone. Br>

There are also disadvantages to trading anonymity. The places where bitcoin is used the most are fraudulent, money laundering, black market and other illegal transactions. Now there is another speculation.

Money is an illusion

Money is an illusion —— but as long as everyone has this illusion, then it is useful. In the past, the dollar represented gold, and the government had promised that you could exchange it for gold at any time. However, the United States abandoned the gold standard system in 1971, and that kind of guarantee will die out (so please don't call it another dollar). Now everyone is still using the US dollar, just because of the long-standing habits, traditions and government support. If everyone suddenly does not recognize the dollar, it becomes a pile of waste paper. This is true of all currencies in today's world, including bitcoin.

Summary

Bitcoin as a technology (its algorithms and systems) is indeed a new thing, but as a currency, its birth process, like other currencies, is not worthwhile at first. As everyone's recognition of it gradually increases, so does the value. In the past, this process may take thousands of years, but in the Internet age, it may not take so long to achieve. So, if we all talk about bitcoin, then bitcoin won.
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