In this
post, we attempt to identify some Important Points about Bitcoins to give you a clearer
understanding of what it is, what it does and how you can use it to buy
products or services online.
This
article was written in an attempt to create awareness to readers about
this technology.
1. What Are Bitcoins?
The
Bitcoin is a form of currency without notes and coins, it is a digital
currency.
In this
era of Internet and digitization, we’ve moved from phone to VoIP calls,
face-to-face meeting to video conferencing, fax to email, cable television to
IP TV, and the list goes on.
2. Who Developed The Idea Of
Bitcoins?
The
concept of Bitcoins was developed by Satoshi Nakamoto, who resides in
total anonymity. He is said to be from Japan but his mail ID was from Germany,
plus the bitcoin software was not available in Japanese.
He
developed the system and the Bitcoin software (that is used to run the system)
in 2009 but disappeared into thin air in 2010. The other developers of the
system stopped hearing from him in 2010, and plenty of speculation turned up
about his real identity.
Some
even suggested that his name was just a mash up of popular Japanese companies —
Samsung, Toshiba, Motorola. But what he created was definitely the fantasy of
every tech guy in the world.
3. What Is So Special About The
Bitcoin System?
The
Bitcoin is a system which allows you to do anonymous currency transactions and
no one will come to know about the payment or about all other info related to
the payment, including who sent it, who received it, etc.
Satoshi did it by making the system – a peer-to-peer network – controlled by no central authority but run by a network of contributors and freedom enthusiasts, who donated their time and energy to this innovation. Essentially, people can do money transactions and no authority or organization will come to know about it.
4. What Is Double Spending?
We can
make many copies of digital data, e.g. people copy software and sell it as
counterfeit or pirated copies. We may face the same problem with digital
currency – one can copy the digital currency (let’s suppose USD10) and use it
as many time as he/she like (as many notes of USD10).
Satoshi
solved this problem by showing all transactions in a public list. Whenever a
new transaction is made, its validity is checked by confirming from the list
that the digital currency was not used before. This way, no one can copy the
currency and use it for more than one time. It’s a simple but effective idea to
stop double spending of the same bitcoin.
5. How Does A Public Listing Make
Things Anonymous?
The
public listing only shows the transaction ID and the amount of currency
transferred. You will be anonymous in the system because you don’t need to
provide any of your personal details like your name, address, email, phone
number, etc. In comparison, when you use payment gateways like Paypal you have
to give up all these personal details.
6. How Do You Use Bitcoins Then?
Bitcoins
are kept in a digital wallet which you can keep in your computer, or on a
website online,which will manage and secure your wallet for you. You can have
as many wallets and bitcoin addresses (where you receive money from others) as
you like.
What’s
more, you can use Bitcoin software on top of Tor to prevent anyone from
tracking your IP address – total anonymity guaranteed!
7. How Many People Are Using
This?
At this
very moment, 10.71 million Bitcoins are in existence, which is like 207.929
million USD worth! In fact, the Canadian government is working on their own
crypto-currency, named MintChip. (a glance:)
In one
day, more than 45,000 transactions of a total of BTC 2.5 million (worth of
USD48.5 million) is handled by the bitcoin network.
8. How Do I Acquire Bitcoins?
Using
and getting Bitcoins is really easy. There are various ways to get Bitcoins:
i. ‘Mining’
ii. Currency
exchange (bitcoin in return for Dollars or Euros) via bitcoin provider services
likeMt.Gox
iii. Providing
services to others in return of Bitcoins
9. What’s Mining?
Mining
is a process of extracting Bitcoins currency. Bitcoin mining is a business –
most people mint Bitcoins to gain profit. Bitcoins are minted using a special
software (known as Bitcoin Miner) which tries to find a new block in the chain
of Bitcoin network.
Whenever
a new block is found, its owner is gifted with 50 Bitcoins. Technically, a
computer has to perform long and tough hash calculations to find a new block.
10. How Do You Spend A Bitcoin?
Spending
Bitcoins is a bit easier. You can send Bitcoins to a person, buy goods, or
donate to non-profit foundations who accept it, such as Wikileaks, P2P
Foundation, Operation Anonymous,Free Software Foundation, Archive.org.
You can
send Bitcoins to anyone once you know their bitcoin address.
Wrap Up
The
Bitcoin system is being quickly adopted. BTC1 having a worth of USD6 a year ago
is now worth of USD19+. Security experts and digital freedom enthusiasts praise
Bitcoin system for being a one-of-the-kind system that opens doors to
possibilities.
Because of its guaranteed anonymity feature, it’s used by people
who are concerned of their privacy. As no authority can trace the transactions,
this also lead to misuse of the system for example, in illegal work.
