The world has changed a lot over the last couple of decades and brought us into a much more connected and technologically advanced society. Even the way people use money and complete transactions is being revolutionized by the advent of new technology. When I first heard about Bitcoin I was blown away by the information and thought that society had entered a whole new era of technology. At first it was really hard for me to wrap my head around the idea but the more I researched and the more I learned about Bitcoin and blockchain technology the more I realized that the way things work will change drastically in the future based on such innovative thinking. To understand the basics of how Bitcoin works, I will first explain a little about cryptocurrency.
Cryptocurrency sounds like something out of a sci-fi movie when in reality it is being used by millions of people around the world today. Bitcoin, or BTC, was launched in 2009, becoming the world’s first decentralized form of cryptocurrency, a medium of monetary exchange that uses cryptography to control the amount of currency available and to secure any and all transactions.
Because Bitcoins are a digital form of currency, there needs to be a digital way to track all of the transactions to keep up with what is spent and where. Whenever there is a transaction it is digitally entered into a general ledger. Each and every set period that is logged in the ledger is called a block and becomes part of the ‘blockchain’. Everyone who participates in the Bitcoin world has access to the block chain and is able to see what is going on at any given moment.
So what’s the deal with mining and Bitcoin miners?
Bitcoin mining, in layman’s terms, is a way to keep all of the transactions in order and discover more bitcoins. Bitcoin miners use special kinds of hardware to solve mathematical problems. Although commonly referred to as mathematical problems in the Bitcoin world, the problems at hand are users organizing the order of transactions by logging computer-generated hash algorithms in numerical sequence based on order of transaction. Hashing secures the blockchain by making sure the blocks are distributed properly and most importantly, providing a security mechanism that will make it so the block can´t be altered in the future. If one little number is changed in the sequence by someone attempting to make a fraudulent transaction, the entire community will be able to see the blocks in the chain are out of order. This is what makes Bitcoin transactions so secure. This kind of transparency is what makes the technology behind Bitcoin so important and desirable.
The reward for all of the hard work done by the miners is payment in Bitcoins. This is the only way new Bitcoins are issued. Doing it this way incentivizes more people to get involved and start mining, expanding the amount of users in the community and the amount of Bitcoins in circulation. The math problems that are solved by the miners are incredibly important to the survival of Bitcoin because they keep the network secure by approving each and every transaction. This peer-to-peer, proof-of-work system is crucial to Bitcoin’s survival. It is essentially a record-keeping service that benefits all involved by guaranteeing secure transactions and making sure all involved can trust the system.
ASIC is an integrated circuit that is customized for a specific use, a hardware that revolutionized the way people can mine Bitcoins. The hardware has made the mining, which is an extremely complicated and time-consuming process, much faster and way more efficient which in turn has increased the amount of miners involved.
Bitcoin isn’t just popular among those who are part of the community and promote the currency.
Ben Bernanke, who served two terms as chairman of the central bank of the United States – the Federal Reserve – wrote about cryptocurrency in a letter to US Senators saying, “[Virtual currencies] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.”
Mr. Bernanke isn’t the only power player to see the value in Bitcoin. Companies like Expedia, Dell, and Kmart – among many others – all accept payments in Bitcoin, which is serious progress in terms of legitimacy in the public eye.
When it comes to the virtual world there is no one who is more respected and revolutionary-minded than Eric Schmidt, the executive chairman of Google. When asked for his thoughts on Bitcoin he had nothing but positive remarks. He said, “Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value.”
Only time will tell what will happen with Bitcoin down the road. The technology used will continue to grow and become more efficient and its use will spread way beyond the world of cryptocurrency. The future of Bitcoin has experts scratching their heads. No one knows exactly how this relatively new idea is going to end up, but one thing is for sure; everyone is impressed by its growth, especially by the technology used with the blockchain. The blockchain technology and its use as a registrar tool for any kind of good or service has incredible amounts of potential and will only continue to grow into a game-changing technology used all around the world.