Bitcoin has been the buzz of the Internet for years, but is it really the currency of the future, or just another way to gamble online?
What is Bitcoin?
Thought to be the first cryptocurrency, Bitcoin is a digital form of payment that can be exchanged online for goods and services—just like traditional money. Think of Bitcoin and other crypto “coins” like chips at a casino. Each coin holds a representative value, and you need to exchange traditional money for coins (or fractions of coins) to purchase goods and services.
However, unlike traditional currencies, where transactions are verified by a single regulatory system (think banks or government agencies), Bitcoin transactions are verified through a decentralized system called the blockchain. The blockchain divides the responsibility of verifying Bitcoin transactions over a network of many computers. But who is running these computers?
What are Bitcoin miners?
The Bitcoin system relies heavily on what are known as Bitcoin miners. For bitcoin transactions to work, users can set up computers to verify the transactions of others across the Bitcoin network. These computers are operated independently and use a process called proof of work, solving increasingly difficult equations to verify a transaction and add it to the public record of the blockchain. The entire system relies on users verifying the transactions of others so occasionally, these users are rewarded with a bitcoin for their trouble. It can take years and LOTS of computing power to ever receive a bitcoin; that’s where the term “mining” comes in—users’ computers are mining for “gold” by verifying transactions.
What makes Bitcoin valuable?
Like all forms of payment throughout history, Bitcoin is only as valuable as the goods and services you can buy with it.
Another huge selling point for a lot of Bitcoin supporters is the decentralized nature of the blockchain. Because transactions are verified by users spread over a wide network, many supporters feel Bitcoin and other cryptocurrencies are more transparent and secure than traditional money. Every Bitcoin transaction is public, meaning it’s very difficult to copy or fake bitcoins, or spend bitcoins you don’t own.
Part of Bitcoin's appeal from the very beginning has been anonymity. While its true that all records on the blockchain are public, the nature of the ledger is much different than that of a traditional bank statement. Where traditional money is tied to your name, bitcoins are only tied to an account number. Users can see when a Bitcoin changed “hands” from one account to another, but no one would know it was your account number unless you told them.
Is this the currency of the future?
That’s up for you to decide. Bitcoin and other cryptocurrencies are prone to rapid fluctuations in price, sometimes rising and falling wildly over the course of a single day. It’s difficult to pinpoint what influences these dramatic changes (we’re looking at you, Elon), so it comes as no surprise that Bitcoin trading draws frequent comparisons to gambling.
Despite its wild popularity, many governments and traditional regulatory bodies are still trying to understand the future of Bitcoin, its legitimacy and what influences the market.
Bitcoin has been around for more than a decade, and as more markets become comfortable accepting bitcoin payments, it’s likely we’ll continue to hear about Bitcoin well into the future.