Bitcoin Basics: The phenomenon explained in plain English

Bitcoin

The excessive excitement for cryptocurrency is largely provoked by the great demand for bitcoin. Many people recognize it as a full-fledged means of payment. But in order to clearly understand what Bitcoin is and where it comes from, it is first necessary to understand the technical aspect and the history of its creation. Initially, it is worth remembering that bitcoin is a digital currency. In this article we will discuss Bitcoin Basics: The phenomenon explained in plain English. The creation of bitcoin is attributed to Satoshi Nakamoto. Officially, he is credited with the idea of a cryptocurrency based on math calculations.

What is Bitcoin ensured by?

Previously, national currencies were backed by gold and silver, now by GDP. In theory, you can go to any bank in the country and exchange paper money for its equivalent in the form of gold bullion and back. While Bitcoin is not backed by anything, it’s just math. During the creation of Bitcoin, the main idea was to create not an analogue of real money, but a semblance of gold – what modern money is secured with. So how is gold different from dollars, euros, etc.? The volume of gold is clearly limited in nature. There is no way to get more gold than there is. And it would be very difficult to create it synthetically, and this process is unstable.

It takes people’s time to extract gold from nature. As a result, 1 pound of mined valuable metal can be pegged to the labor required to mine it and used in the future as the equivalent of free labor, in other words, money. Something similar is inherent in bitcoin. The cryptocurrency is limited to 21,000,000 coins. When the total amount reaches this number, the subsequent issuance will be stopped so that inflation does not occur. Coin mining needs specific costs. Whereas gold mining takes human labor, Bitcoin mining takes computer resources.

Where does bitcoin come from?

There are certain ways to acquire cryptocurrency – buying or exchanging for dollars and other real currency, receiving bitcoin as a reward for the work done. But the very first source is mining, which is the generation of coins through mathematical calculations. In theory, the owner of any computer is able to install a mining program to start earning digital currency.

In practice, mining has the following features:

  • The level of economic rationality of mining depends on the power of the computer. The PC must have the most powerful gaming card, then you can start mining.
  • Before you start round-the-clock mining, you need to measure the mining speed, then it should be compared to the actual electricity consumption with the income brought in.
  • It is possible to significantly increase the mining of cryptocurrencies by combining into a pool with other miners. Then there will be a common mining using the computing resources of the entire group.

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