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What Is Bitcoin

Most Bit-coiners suck a lot when it comes to explaining bitcoin; they start with “Bitcoin is a cryptographic”, “Bitcoin is a decentralized” WTF!! Is that what the layman wants to hear?

Bitcoin is a new kind of currency that isn’t regulated by any government.

Bitcoin is gold that resides on the internet. The value of 1 bitcoin will depend on how much people need bitcoins. So just as the scarcity of gold and the difficulty involved in mining gold makes it very valuable, the scarcity of bitcoin and the difficulty to mine bitcoin it also makes it very valuable.

I describe bitcoin as “a digital version of gold.” eGold.


Currency is a medium of exchange for goods and services, and nothing more. When something is scarce and people want it, it can automatically be used as money. In the past, before Paper Money was born gold was cut into flat chips and used as money (Again scarcity of gold).’

Bitcoin is an electronic currency (eCurrency) as people have begun to accept it as a form of exchange for goods and services. Unlike any other normal modern-day currency, USD, EUR, GBP etc. where there is a central authority that controls the printing of these currencies and inflation rate bitcoin is decentralized (there is no central authority/bank/server) Again, just like gold.

There is a fixed amount of gold in this world (Planet earth) we just keep mining maybe we can find all. Also, there is a fixed number of bitcoins that can exist. We just keep mining maybe we can reach the limit.

What has really made bitcoin attractive is the fact that there is no server, there is no central bank you have full control over your funds. The question many people ask now is how the bitcoins are generated or created. How are they are minted since there is no central bank.


Bitcoin Miners are like the Central Bank of bitcoins. BITCOINS are mined with software called Bitcoin Miners; it sounds funny right? One of the most common points of confusion for new Bit Coiners is the concept of mining. Well, there are a lot of technical terms you need to understand before you can understand bitcoin mining, but I will try to make this explanation as simple as possible.

BITCOIN MINING is the process by which some users put their computers to work verifying transactions in the bitcoin network. These users are rewarded with new bitcoins when they successfully complete the work of verification. These miners are like the Central Bank of bitcoins because they are the one who release more bitcoins into the economy by distributing the coins they mined by spending it.

The miner’s computer solves very complex calculations that have the ability to overheat your computer processor. The result of this calculation is called HASH. A hash cannot be reversed. These calculations to confirm transactions that happen on the network is called mining because it slowly makes new currency available at a rate that resembles the rate at which commodities like gold are mined from the ground.

Some Computer Processing Units or external processing unit can perform these computer calculations (HASHING) faster than others and this speed is rated in HASHRATES e.g. 1H/s means the processor performs one hash in one second 1KH/s means the processor performs 1000 hashes in one second, 1 MH/s means that the processor performs 1,000,000 hashes in one second.

Once again is the hashing term is beginning to cloud your brain and make you feel dizzy? A hash is the solution to a complex mathematical puzzle solved by a processor to verify transactions that happened on the bitcoin network. Some processors are faster than other processors when it comes to solving the math and this is measured in hash-rates. A higher hash-rate means the processor computes more hashes in less time. These types of processors are better for mining as you will be rewarded with more bitcoins.

How Bitcoin Mining Works to Mint New Coins

People are sending coins to each other over the bitcoin network every second, but someone keeps a record of all these transactions, right? Yes, this happens so that we know who had paid what? The bitcoin network handles this by bundling all of the transactions made during a short period (10 minutes) into a chunk of data, called a BLOCK.

These blocks (or grouped transactions) are linked such that each new block proves that older blocks were valid. Linked blocks are called BLOCK-CHAIN.

The Bitcoin network was designed in a way that only 6 blocks will be solved in 60 minutes(1hr) Which means that in every 10 minute interval a new block is created for processors to HASH (verify transactions contained in the block).

The first transaction in a block is a special transaction that produces new bitcoins (25) owned by the creator of the block. The creator of the block is the miner or the computer that bundled the transactions together, verified them and put them in the block chain (where older blocks were kept.)




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