What is Bitcoin?
"An innovative payment network and new kind of money!"
~ by Benji Zamora on October 2, 2016
Bitcoin is a decentralized currency, meaning there's no political body or central bank in charge of monitoring and maintaining its systems. This means that all of bitcoin is free from any political interests, free from taxes nationally and internationally, and has no exchange rates when purchasing something in Bitcoin from overseas, for example.
It is best to think of bitcoins as an abstract limited resource. Think if gold only existed in our imaginations, and it was proven solely with math. A bitcoin is never a coin, or a file, or anything that you can point at and say that is a bitcoin. A bitcoin is never stored on any hard drive or any server. It never actually exists as memory on a computer, it only exists as records of transactions using the blockchain. (Bare with me here.)
The blockchain is a forever-ledger, which is to say it is a list of every transaction that has ever taken place using bitcoin. This sounds like it might be an exhaustive list, and it most assuredly is. Every time a transaction takes place it is recorded on the blockchain, and it is available for everyone to see. Each record shows how much one spent, and the address you're sending that money to. You can view all the transactions on the blockchain in real-time here. It's pretty cool to see.
Something that's important to understand about Bitcoin is that there are a limited number of them. In fact there are only 21 million possible bitcoins ever, with 15.2 million currently in circulation. These new bitcoins come into circulation by an action called mining, which is essentially solving a clever algorithm that is designed to become harder and harder to solve the more bitcoins there are in existence. When a miner solves an equation, the answer is added to the ledger and the miner is rewarded those bitcoins.
The powerful concept behind the blockchain, or the forever-ledger, is that everyone can see how much everyone has spent and where it was sent. This means that a transaction is only legitimate if that transaction shows up on the blockchain. The idea behind this is that there is no middle-man verifying the legitimacy of each transaction, but an automated system that has no wiggle room or human errors. In fact the only way to even know how much bitcoins you have to spend right now is by analyzing how much bitcoins you've received and spent, and adding up all your transactions since the very first time you ever used the blockchain. This is how bitcoins never actually exist, you simply have bitcoins to spend if all your blockchain transactions add up to more than zero. Crazy huh? This also makes bitcoins extremely secure and reliable.
Bitcoins are the focal income for us here at Pass The Piece. We decided to take this route because of its decentralized nature that makes us feel so much more in control of our money and our resources than working with traditional banking systems and the government.
The amazing system and protocol of Bitcoins and the Blockchain was invented by the infamous and mysterious Satoshi Nakamoto, who released the concept to the Cryptography Mailing list back in November 2008.
Satoshi Nakamoto is an anonymous figure chalked up to be a modern societal hero. He/she/they simply released a 9 page paper detailing the bitcoin protocol, worked on setting up the initial open-source infrastructure, then faded away by 2011 claiming to have moved on to other things.....
Have we piqued your curiosity?
Follow up next week for more insight on Bitcoin plus an in depth review of the blockchain practicality & (current or upcoming) applications!
~ Pass The Piece Team