Bit coin (BTC) is known as the first open-source, peer-to-peer, digital crypto currency that was developed and released by a group of unknown independent programmers named Satoshi Nakamoto in 2008. Crypto coin doesn’t have any centralized server used for its issuing, transactions and storing, as it uses a distributed network public database technology named block chain, which requires an electronic signature and is supported by a proof-of-work protocol to provide the security and legitimacy of money transactions. The issuing of Bit coin is done by users with mining capabilities and is limited to 21 million coins. Currently, Bit coin’s market cap surpasses $138 billion and this is the most popular kind of digital currency. Buying and selling crypto currency is available through special Bit coin exchange platforms or ATMs.
The smallest unit of a bitcoin is called a satoshi. It is one hundred millionth of a bitcoin (0.00000001) – at today's prices, about one hundredth of a cent. This could conceivably enable microtransactions that traditional electronic money cannot.
Founded in 2013, Bitmain Technologies is a privately held company that develops Bitcoin mining hardware and ASIC chips. The firm reportedly held 70-80 percent of the market for Bitcoin mining hardware in February 2018. Bitmain also operates one of the largest Bitcoin mining pools, Antpool. Earlier this year, the company was reported to be involved in the development of Ant Creek mining centers in the U.S.
Bitcoin and the entire cryptocurrency market hit new lows at the end of June with mainstream news outlets this weekend reporting the “Bitcoin bubble” had finally burst. But it hasn’t, Bitcoin appears to be back with a price rebound.
“As we know, markets don’t move on news. They move on volumes.”
Questions about its value, security and history, all eventually lead to one place: Where do bitcoins come from?
While traditional money is created through (central) banks, bitcoins are “mined” by Bitcoin miners: network participants that perform extra tasks. Specifically, they chronologically order transactions by including them in the Bitcoin blocks they find. This prevents a user from spending the same bitcoin twice; it solves the “double spend” problem.
Skipping over the technical details, finding a block most closely resembles a type of network lottery. For each attempt to try and find a new block, which is basically a random guess for a lucky number, a miner has to spend a tiny amount of energy. Most of the attempts fail and a miner will have wasted that energy. Only once about every ten minutes will a miner somewhere succeed and thus add a new block to the blockchain.
This also means that any time a miner finds a valid block, it must have statistically burned much more energy for all the failed attempts. This “proof of work” is at the heart of Bitcoin’s success.
For one, proof of work prevents miners from creating bitcoins out of thin air: they must burn real energy to earn them. And two, proof of work ossifies Bitcoin’s history. If an attacker were to try and change a transaction that happened in the past, that attacker would have to redo all of the work that has been done since to catch up and establish the longest chain. This is practically impossible and is why miners are said to “secure” the Bitcoin network.
For those involved in the new age of investment, digital assets are constantly at top of mind. These stories delve into the ever-growing world of commodities on the blockchain.
If you’ve made the decision to buy some bitcoins, you may now be asking yourself how to store the digital currency. In name, the answer is what you might expect from experiences with fiat currency. But the details require a little explanation.
The private keys that are necessary for accessing a Bitcoin address are stored on a “bitcoin wallet.” In general, wallets grant you access to your public Bitcoin address and allow you to sign off on transactions, but they differ based on how you choose to access them. Factors to consider when choosing the best bitcoin wallet for you include security, anonymity and control.
Desktop wallets allow users to create an address for sending and receiving bitcoins and provide a place to store the private key for doing so. This can be done by downloading software to an individual computer.
Mobile wallets, accessed through apps, allow users to transact on the go. While “full Bitcoin” clients download the entire Bitcoin blockchain, mobile wallets are designed to utilize only a small fraction of the blockchain and rely on other nodes within that network to access the remaining necessary information.
Custodial wallets, which store Bitcoin keys on the internet through a third-party website, also allow users to access their bitcoins from almost anywhere. There is, however, the potential danger associated with entrusting someone else with that information.
Bitcoin paper wallet services provide users with a Bitcoin address and two QR codes, one that links to that address and another that provides the private key necessary for transferring bitcoins stored on it. The thinking is that this eliminates the digital storage of the key and, therefore, the potential of a cyber attack.
There are also wallets that store private keys on physical devices, like USB sticks, external hard drives and hardware wallets.
Ultimately, the choice of bitcoin wallet will come down to an individual user’s preferences. Whatever they decide, it will be a crucial aspect of their experience with the digital currency.
Privacy and security measures are often the first technologies to evolve in the blockchain space. As these measures grow and become applied more widely, this space will bring them to the forefront.