Bitcoin, the Peer-to-Peer Currency that Hopes to Change the World – Industry
I take an interest in Bitcoin. Could it be that a social currency is due? Will it last? Will it be safe? Can we trust it? Who runs it? What is it? TNW’s Joel Falconer gives us his story.
Bitcoin is a peer-to-peer currency with no centralized authority, that provides some level of anonymity to its users. Those behind it claim that it has the potential to change the way our economies work.
But you already knew all of that: Bitcoin has been around for quite a few years, but in the last few months it has received more attention and discussion than in its whole lifespan. This attention, in tandem with the limited supply of currency, has seen huge, leaping increases in the value of each Bitcoin in USD.
By now, most of us know at least a little about it. But how did it begin, and why? What do economists think of Bitcoin?
The Genesis Block
Bitcoin was officially announced by its creator, Satoshi Nakamoto, in January of 2009. As a group that largely sees themselves as revolutionaries, the Bitcoin community uses terms for this day that have an almost religious air: the dawn of time is one such phrase. This is the day that the first Bitcoin block was generated, something you’ll hear referred to as the Genesis Block.
A “block” contains a record of transactions and forms part of a chain that represents every transaction ever made over the Bitcoin network. Each computer running Bitcoin has a full copy of this transaction history, and contributing to the chain by having your computer’s client contribute a full block of transaction data collected through the network rewards newly minted Bitcoins — currently at a rate of 50 per block.
This reward rate is designed to decrease over time. One of Bitcoin’s more unusual aspects is that there’s a cap on the number of coins that will ever be generated. That number is 21,000,000 Bitcoins, or BTC in currency shorthand, and the network adjusts the time it takes to complete a block and the reward distributed for completing one over time so that this cap isn’t reached too quickly.
Having your client complete new blocks and collect the reward for doing so is commonly referred to as ‘mining’.
As it becomes more difficult to create new currency and more people express an interest in Bitcoin, the value of the currency has continued to rise at a rapid rate. The built-in scarcity of the currency suggests that this growth in value is by no means nearing stability.
On the 9th of February, 2011, two years and one month after the creation of the Genesis Block, the currency reached parity with the US dollar, trading at a one-to-one cost.
Today, only a few months later, Bitcoin is worth US$14.41. You can see how much that figure has changed by the time you read this by checking Bitcoin Charts Markets, which aggregates data from across various exchanges.
Read the whole story here: Bitcoin, the Peer-to-Peer Currency that Hopes to Change the World – Industry.