Bitcoins – Revolutionary concept!
Bitcoins – the discovery which has made the boring-looking-dull field of finance, suddenly more exciting! And why shouldn’t it? It has been ages since, any ground-breaking concept came in financial transaction. In this article, we would go into bit detail and see what it is all about.
In the world of binary numbers (aka digital world), there is a thing called cryptocurrency. It is similar to normal currency, with two major differences – first, it is completely digital and second, it is totally independent of any central authority. So, no government regulated agency has direct intervention in this. Don’t worry, it is all legal!
Okay, Bitcoins. Well, Bit coins. “Bit” is a commonly used word in computer lingo (Bits and Bytes). Bitcoins are the first cryptocurrency to come into existence (year 2009) and since then, the rush for using it has gone exponential. As of year 2016, the total value of money supply in Bitcoins has crossed $2 Billion.
Next, how these currencies work? These currencies work in a system of peer-to-peer network in which, each transactions get marked by a unique signature from either side. You don’t get any cash or coins in hand if you are dealing completely in Bitcoins. These are in complete crude sense numbers on your digital wallet. To get the numbers, you have to solve math problems – no not like in school, but one that requires a heavy amount of computing.
Bitcoin mining is the process used to earn Bitcoins. In a general sense, Bitcoins are not earned but discovered out. In an analogous fashion consider a currency coin embedded in an iron/ice block. In order to get the coin, you have to first discover the block and then break the block piece by piece till you reach the coin. Now, replace the coin currency by Bitcoin and the ice/iron block by mathematical functions. These functions are to be solved or decoded in order to reach the coins.
You may be wondering, what’s the competing factor? Doing the above computations requires a good amount of hardware and electricity. In recent past, it was possible to do the bitcoin mining with your computer CPU or high-speed video processor card. The scenario has changed and much faster systems have come to dominate the industry. So, anything less than that, will consume more electric energy than you will earn from it. The more computing power you can share, the greater will be your share in the reward. The entire Bitcoin network compensates the miners for their efforts directly proportional to the computational power contributed.