Bitcoin-The Virtual Currency
Today, E-Crime Expert briefly explains what Bitcoin is.
This Blog post does not intend to make any advertising, encourage nor discourage people investing in Bitcoin. It is purely descriptive and provides our readers with the basic information on Bitcoin.
Bitcoin is a decentralized digital currency based on an open-source, peer-to-peer internet protocol. It was introduced by a pseudonymous developer named Satoshi Nakamoto in 2009.
– can be exchanged through a computer or smartphone locally or internationally without an intermediate financial institution.
– in trade, one bitcoin is subdivided into 100 million smaller units called satoshis, defined by eight decimal points.
– It is not managed like typical currencies: it has no central bank or central organization. Instead, it relies on an internet-based peer-to-peer network. The money supply is automated and given to servers or “bitcoin miners” that confirm bitcoin transactions as they add them to a decentralized and archived transaction log approximately every 10 minutes (Fig. 1).
Bitcoin is the most widely used alternative currency and accepted by various merchants and services internationally. As of March 2013, the monetary base of bitcoin is valued at over $1 billion USD.
Each 10-minute portion or “block” of the transaction log (as time spent) has an assigned money supply that is awarded to the miners once a “block” is confirmed.
10 minutes time spent=certain Bitcoin amount
The amount per block depends on how long the network has been running and how much in transaction fees has been paid. Currently, 25 new bitcoins are generated with every 10-minute block. This will be halved to 12.5 BTC during the year 2017 and halved continuously every 4 years after until a hard limit of 21 million bitcoins is reached during the year 2140.
In October of 2011, a bitcoin was trading at around $5. Today, by contrast, a single bitcoin is worth just north of $140-$150.
The network’s software confirms transactions when it records them in the transaction log or “blockchain” stored across the peer-to-peer network every 10-minutes. Confirmation of future transaction records makes the ones before it increasingly permanent. After six confirmed records or “blocks” (usually one hour-10 minutes x 6 block), a transaction is usually considered confirmed beyond reasonable doubt.
Initiators of a bitcoin transaction may voluntarily pay a transaction fee for the confirmation of these records. Any fees are collected by the operators of bitcoin servers — often called nodes or “bitcoin miners”.
However, transaction fees may not cover the cost of electrical power required to operate a bitcoin miner. As a result the network server operators often rely on “mined” bitcoins as their only significant revenue.
Basically, mining means that a X user gets Y amount of Bitcoins (in transactions fees) for facilitating the transaction while lending out his resources (Computer, usage electricity, etc). It could be done either individually or by joining a mining pool. There is software for doing this: Python OpenCL Bitcoin Miner (poclbm, graphical interface (GUI), etc (Fig. 2).
The transaction log is authenticated by end-users through hashed ECDSA digital signatures (similar to a username and password-you could read E-Crime Expert’s Blog Post here) and confirmed by intense calculations of varying difficulty, performed by dedicated servers called bitcoin miners.
Based on digital signatures, payments are made to bitcoin “addresses” or “public keys”: human-readable strings of numbers and letters around 33 characters in length, always beginning with the digit 1 or 3, as in the example of 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W.
Users obtain new bitcoin addresses as necessary; these are stored in a wallet file with links to cryptographic passwords or “private keys” that enable access to and transfer of bitcoins. A file or “wallet” containing bitcoin addresses is usually encrypted with an additional password.
An online purchase is considered safer with bitcoin versus a credit or debit card, according to Denis G. Kelly, a leading identity theft and fraud prevention expert.
“When using payment cards, you are required to include your account number and your billing address,” Kelly said. “With this information, identity thieves are off and running. Whereas with Bitcoin, their encryption renders it so that only the owner of the bitcoins can use them.” (Fig. 3).
Because Bitcoin transactions are broadcast to the entire network, they are inherently public. Using external information, it is possible, though usually difficult, to associate Bitcoin identities with real-life identities. Unlike regular banking, which preserves customer privacy by keeping transaction records private, loose transactional privacy is accomplished in Bitcoin by using many unique addresses for every wallet, while at the same time publishing all transactions.
If you have any question you could contact: firstname.lastname@example.org
Additional information can be found at: www.e-crimeexppert.com
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