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Bitcoins: What They are and How They Work

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Bitcoins were first created and introduced in 2008 by Satoshi Nakamoto–who may be one person or a group of people. Bitcoins are like other currencies but they are online and transactions don’t involve a bank or any other middle man.

There are two main different ways to acquire bitcoins. The first is to buy them with a standard currency (U.S. dollars etc.). The other way is to mine for Bitcoins. This is not your average mining, so put your pickaxe away. Bitcoin mining takes computer processing power to mine a block.

A block is a math problem that the computer has to solve and gets rewarded with a certain amount of bitcoins. The difficulty of the block is determined so that the amount a blocks mined is constant. Then a proof of work is made to prove that it is a valid block.

These blocks then form a chain of blocks called a block chain which starts with the origin block. Sometimes the chain splits and the larger chain gets continued while the shorter one does not. But the largeness of the chain is not determined by the amount of blocks, instead it is the combined difficulty of the blocks in each chain. This is to prevent miners from getting lots of easy blocks from the chains.

The amount of bitcoins per block varies, but there is a pattern to it. For every 210,000 blocks (about every four years) the reward gets split in half. This will continue until the reward rounds down to zero. But people will probably stop mining before that amount of bitcoins due to transaction fees become greater than the reward.

Going a step back, when you earn a bitcoin it goes directly to your bitcoin wallet. Like a normal wallet, it simply stores your virtual money. The bitcoin wallets can safely store bitcoins. To learn more about bitcoin mining click here.

There are many more benefits to bitcoins than not having a central bank. Bitcoins can be transferred from person to person instantly and can also be exchanged for other currencies.

The value of bitcoins is not set by a central location; instead, all the people set it. At the moment the value of one bitcoin is about $200. That is a lot for just one piece of currency, but luckily bitcoins come in smaller sizes, down to 0.00000001 of a bitcoin which helps with the finite amount of bitcoins.

Bitcoins, unlike other currencies, can’t be counterfeited or double spent. This is because the mining needs a proof of work and this removes both of the problems that some currencies face today.

Bitcoins are one of the most successful online currencies and with growing technology it is important that we continue to keep moving forward and embrace new creative ideas. To start bitcoin mining click here.

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Bitcoins: What They are and How They Work