Bitcoin is digital money that operates on the Internet, running as an application on a user's laptop or smartphone. Bitcoin currency units are stored in a digital "wallet" and transmitted instantly and securely from anyone to anyone, anywhere in the world. People can use bitcoin to purchase products online, like a credit card. It can be used to send money across borders, for remittances to family or international business. Bitcoins can be purchased and sold, exchanged for other currencies at a floating exchange rate, at specialized currency exchanges. Bitcoin in a sense is money for the Internet.
Bitcoin is digital money that operates on the Internet, accessed through an application on a user's laptop or smartphone. Bitcoin currency units are stored in a digital "wallet" and transmitted instantly and securely from anyone to anyone, anywhere in the world. People can use bitcoin to purchase products or services, like a credit card, online or in person. It can be used to send money across borders, for remittances to family or international business. Bitcoins can be purchased and sold, exchanged for other currencies at a floating exchange rate, at specialized currency exchanges. Bitcoin in a sense is the perfect form of money for the Internet: fast, secure, borderless.
Unlike traditional currencies, bitcoins are entirely virtual. There are no physical coins, or even digital coins. The coins are implied in transactions which transfer value from sender to recipient. Users of bitcoin own _keys_ which allow them to prove ownership of transactions in the bitcoin network, unlocking the value to spend it and transfer it to a new recipient. Those keys are stored in a digital wallet on each users computer. Possession of the key that unlocks a transaction is the only prerequisite to spend that transaction, putting the control entirely in the hands of each user.
Behind the scenes, bitcoin is a protocol, a network and a distributed computing innovation. The bitcoin currency is really only the first application of this invention. As a developer, I see bitcoin as akin to the Internet of money, a network for propagating value and securing the ownership of digital assets via distributed computation. There's a lot more to bitcoin than first meets the eye.
Unlike traditional currencies, bitcoins are entirely virtual. There are no physical coins, or even digital coins. The coins are implied in transactions which transfer value from sender to recipient. Users of bitcoin own _keys_ which allow them to prove ownership of transactions in the bitcoin network, unlocking the value to spend it and transfer it to a new recipient. Those keys are stored in a digital wallet on each users computer. Possession of the key that unlocks a transaction is the only prerequisite to spend that bitcoin, putting the control entirely in the hands of each user.
Bitcoins are created through a process called "mining", which involves looking for a solution to a difficult problem. Participants in the bitcoin network may operate as miners, using their computer's processing power to attempt to find solutions to this problem. Every 10 minutes on average, a new solution is found by someone who then is able to validate the transactions of the past 10 minutes and is rewarded with brand new bitcoins. Essentially, the currency-issuance function of a central bank is de-centralized and turned into a global competition. The rate at which new bitcoins are created is reduced by half every 4 years, resulting in an exponentially decreasing supply and a fixed total of 21 million coins. As a currency, bitcoin is deflationary and cannot be inflated by "printing" new money above and beyond the expected issuance rate.
Behind the scenes, bitcoin is also the name of protocol, a network and a distributed computing innovation. The bitcoin currency is really only the first application of this invention. As a developer, I see bitcoin as akin to the Internet of money, a network for propagating value and securing the ownership of digital assets via distributed computation. There's a lot more to bitcoin than first meets the eye.
In this chapter we'll get started with bitcoin by explaining some of the main concepts and terms, getting the necessary software and using bitcoin for simple transactions. In following chapters we'll start unwrapping the layers of technology that make bitcoin possible and examine the inner workings of the bitcoin network and protocol.
=== History of Bitcoin
@ -48,7 +48,7 @@ Mining for Bitcoin::
Jing is an engineering student in Shanghai. He has built a "mining" rig to mine for bitcoins, using his engineering skills to supplement his income.
Peer Lending::
Agnes is a shopkeeper in Kisumu, Kenya and needs a loan to buy new inventory for her shop. With the assistance of a micro-lending organization, she is financing a micro-loan in bitcoin from individual lenders all across the world.
Zenab is a shopkeeper in Kisumu, Kenya and needs a loan to buy new inventory for her shop. With the assistance of a micro-lending organization, she is financing a micro-loan in bitcoin from individual lenders all across the world.
Each of the stories above is based on real people and real industries that are currently looking to bitcoin to create new opportunities.
Andreas M. Antonopoulos
11 years ago