Bitcoin is a new form of digital money that can be sent directly from person to person on the Internet without the need for middlemen such as banks. It acts as a medium of exchange, store of value, and unit of account. Many people buy it hoping its price will rise, similar to how investors buy gold or other commodities. Others use it to purchase goods and services both online and at brick-and-mortar retailers. Richard Branson’s Virgin Galactic even accepts it as payment for upcoming space travel adventures!
Exploring Bitcoin: History, Development, and Adoption
While its volatile prices capture the attention of most, what is really exciting about Bitcoin is that it enables transfers of wealth around the world much more quickly and cheaply than traditional government-issued currencies. It also removes the need for a third party to verify transactions, making it very secure.
It works on a public ledger, called the blockchain, that records all confirmed Bitcoin transactions. The blockchain is constantly verified through a decentralized network of computers (known as miners) and enforced with cryptography. New information is periodically gathered into ‘blocks,’ which are added to the chain in chronological order. The blockchain reveals who owns what bitcoins, and allows them to be spent only once (a transaction cannot be reversed).
There is a limited number of Bitcoin coins that will ever be created (nearly 19 million have been mined so far), so the system protects against inflation by creating a fixed supply. The amount of new bitcoin created is reduced by half every 210,000 blocks, or about every four years, a process known as ‘halving.’ This makes the cryptocurrency resistant to manipulation by governments trying to manage deficits or stimulate spending.
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