Bitcoin (Essay Sample)

What is a Bitcoin?

Bitcoin is a digital currency or the most recent digital payment system that allows people to anonymously spend their money since the currency is not affiliated to any government or bank. To clearly understand this currency, it is important to compare it to other types of currency such as coins and money in form of paper. Paper money is affiliated to governments which determine the time to print and circulate it. However, in the case of bitcoin, the miners can utilize particular software that enables them to solve mathematical problems and they are consequently issued with specific sum of bitcoins in circulation. Therefore, bitcoins offers a smart method of providing currency thus creating an incentive for several users to do “mining”.

Bitcoins were created by software engineer operating under the fictitious name Satoshi Nakamoto. He is recognized for providing the first conceptual framework and later bitcoin specifications in 2009. Today, the bitcoins are usually created by different users whose role is to “mine” them when they lend computing power that is used in the verification of transactions of other users. In exchange, the miners/users receive bitcoins. It is also possible to buy and sell the bitcoins in exchange with the U.S. dollars as well as other currencies. The community of bitcoin users and miners has expanded exponentially particularly among people who understand the open-source nature of bitcoins.

How bitcoins work

As a virtual currency, bitcoin utilizes decentralized capabilities to promote secure payments as well as store money that does not need the names of people or bank details. It was originally announced through a circular transmitted via an email as a form of liberating money just in the same way that the internet enabled people to have free access to information. Bitcoin utilizes a public ledger that is known as blockchain. This ledger is used to hold decentralized records of all performed transactions which are owned and updated regularly by Internet users.

For bitcoins to be created, users must have the capacity to create blocks on the network. Every block is generated in a cryptographic manner by gathering the computer skills of the user. These blocks are finally supplemented to the blockchain and this enables users to earn as the network keeps running. It is important to note that there is a limit to the amount of bitcoins that can be generated and this has been wired into the system thus preventing the devaluing of the currency. The highest amount of bitcoins that can be generated is 21 million. Today, there are only 14 million in circulation, with each bitcoin being valued at £1,800.

The Value and Use of Bitcoins

The price and value of bitcoins tend to fluctuate significantly and this is caused by numerous factors. For instance, in 2013, bitcoin value increased and decreased at the same time as the general public came to learn about it and it was accepted in the conventional platform. As the price of bitcoin increased by approximately 10,000%, its value came crushing with the collapse of the major online bitcoin exchange known as Mt. Gox.

The prices surged up again over the years as regulators promoted their initial coin offerings and sold cryptographic tokens that are similar to bitcoins. Studies done at the University of Cambridge have shown that there are over 5.8 million users with cryptocurrency wallets using bitcoins. In addition, bitcoin has numerous uses, and this includes funding companies, investing cash, and transferring money without having to pay fees. However, criminal activities have been associated with bitcoins, including drug dealing, money laundering as well as cybercrime. This is due to the fact that it is almost impossible to connect an individual to a bitcoin wallet.

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