Wed Feb 20 2019
What is Bitcoin?
When the attackers' of WannaCry ransomware sprang into action, it held victims hostage by encrypting their data and demanding money in bitcoins to regain access to their computers. In case many people, it will be the first time to hear the word bitcoins.
So, lets find out what is it -
Bitcoin is a digital cryptocurrency, which is not managed by any bank or government and allows users to spend money anonymously. It was created in 2009 with the help of blockchain technology by an unknown person using the alias Satoshi Nakamoto.
From a user perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and enables a user to send and receive bitcoins. Behind the scenes, the Bitcoin network is sharing a massive public ledger called the "block chain".
This ledger contains every transaction ever processed which enables 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 therefore allowing all users to have full control over sending bitcoins.
Bitcoins are stored in a "digital wallet", which is called as bitcoin mining. The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. In that sense, it's like conventional dollars, euros, or rupees, which are also traded digitally.
Research produced by the University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
What makes it different from normal currencies?
It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. No single institution controls the bitcoin network. This puts some people at ease because it means that a large bank can’t control their money.
Though each bitcoin transaction is recorded in a public log, names of buyers and sellers are never revealed – only their wallet IDs. While that keeps bitcoin users’ transactions private, it also lets them buy or sell anything without easily tracing it back to them. That’s why it has become the currency of choice for people online buying drugs or other illicit activities. However, investigators might be able to track down the owners when bitcoins are converted to regular currency.
Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Nobody owns the Bitcoin network much like no one owns the technology behind email or the Internet. Bitcoin transactions are verified by Bitcoin miners which has an entire industry and Bitcoin cloud mining options.
A conventional currency has been based on gold or silver. Theoretically, you knew that if you handed over a dollar at the bank, you could get some gold back. But bitcoin isn't based on gold, it's based on mathematics. Around the world, people are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is freely available so that anyone can check it. The software is also open source, meaning that anyone can look at it to make sure that it does what it is supposed to.
Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, thefts from exchanges, and the possibility that bitcoin is an economic bubble. Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.
How much is it worth?
According to Coinbase, recently one bitcoin traded for $1,734.65. That makes it more valuable than an ounce of gold, which trades at less than $1,230. The value of bitcoins can swing sharply. A year ago, one was worth $457.04, which means that it's nearly quadrupled in the last 12 months. The bitcoin protocol rules that make 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts. The smallest divisible amount is one hundred millionth of a bitcoin and is called a 'Satoshi', after the founder of bitcoin.
Prices started at $998 in 2017 and rose to $13,412.44 on 1 January 2018. On 17 December 2017 bitcoin's price reached an all-time high of $19,666. Throughout the rest of the first half of 2018, bitcoin's price fluctuated between $11,480 and $5,848. On 1 July 2018 bitcoin's price was $6,343. The price on January 1, 2019, was $3,747, down 72% for 2018 and down 81% since the all-time high.
Bitcoin prices were negatively affected by several hacks or thefts from cryptocurrency exchanges, including thefts from Coincheck in January 2018, Conrail and Bithumb in June, and Bancor in July.