Tech Time – What is bitcoin? Part 2
How are bitcoin created? How do you get bitcoin?
Last week we talked about how bitcoin is a digital currency and what that means. We mentioned that people use bitcoin because it is universal – accepted anywhere in the world, there are no currency conversion rates, transactions are private, transaction fees have typically been low (although that is starting to change), and bitcoin is non deflationary.
How are bitcoin made?
If bitcoin is not backed by gold or printed on a press, how is it made or created? We talked about the bitcoin servers that are located all over the world from people’s basements to big warehouses. There are bitcoin miners in Asheville. How do you get more bitcoin into circulation??
While bitcoin transactions are going on all over the world, which we can see here (these live encrypted transactions), the bitcoin minors are keeping a universal ledger of the transactions. The minors use a very complex math problem to validate and make sure the transactions are accurate, legitimate and secure. When a group (or block) of the transactions are fully validated (solved), new bitcoin are created. The owner of the bitcoin minors is basically paid or rewarded with newly created bitcoin.
Instead of mining for gold or diamonds you are “mining” for bitcoin. The owner of the bitcoin can buy something with the bitcoin or sell the bitcoin (like you would sell a diamond). This puts bitcoin into circulation. The max number of bitcoin that will ever be created is 21 million, which is expected to happen sometime after the year 2110.
The price or value of bitcoin is currently (at the time of writing) around $2300 per bitcoin but the price constantly changes. To see the Current bitcoin exchange price search google for “bitcoin exchange rate”.
You can see a price history graph as see how the price or value has skyrocketed over the last few years. Last year at this same time the price was roughly $600.
There are a several ways you can get bitcoin. You can accept it as a form of payment when you sell goods or services; you can buy bitcoin at ATM machines, or you can buy bitcoin using an app that allows you to purchase bitcoin from bitcoin exchanges/app (ex: Coinbase is a wallet and exchange app). I have seen ATM’s in various locations including convention centers and stadiums.
When you buy or sell using bitcoin, transactions are recorded in your bitcoin wallet. You can access your wallet via an app or on your PC. You can buy and sell in portions of bitcoin like .5 or .10 just like we do $$’s.
Bitcoin are gaining in popularity but they are not the only cryptocurrency. The long term value or ability for bitcoin to become a primary currency is unknown. Other cryptocurrencies could surpass bitcoin even though it is currently the most popular.