Bitcoin
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What is Bitcoin?

Bitcoin is a network that enables a new method of payment via an entirely digital money system. It is also the first peer-to-peer payment option being powered solely by its users and requiring no middle-man, especially a bank.1 In its simplest term, Bitcoin is simply cash for the internet. This payment system relies on the practice of cryptography to control its creation and transactions. It is important to note that there are only 21 million Bitcoins created, and developers "unearth" them using a concept called Bitcoin Mining.

Bitcoin Mining

People compete to “mine” bitcoins using computers to solve complex math puzzles. This is how bitcoins are created. Currently, a winner is rewarded with 25 bitcoins roughly every 10 minutes.2


Who Owns It?

Similarly to the concept of the e-mail, nobody actually owns Bitcoin. This technology is unique in that it is actually controlled by all of the people who are using Bitcoin, since the cryptographic element of the network is created automatically. In 2009, someone by the name of Satoshi Nakamoto was the first to describe this invention in a mailing list, but never claimed responsibility for its creation. Nakamoto left the project in late 2010, and since then, many different developers have been trying to enhance the Bitcoin phenomenon.3


What Does it Do, How Does it Work?

From any user’s point of view, Bitcoin is similar to a mobile app that supplies the user with a personal “Bitcoin Wallet” (similarly to Google Wallet). This wallet is utilized by users to send/receive bitcoins. In a technical perspective, the Bitcoin Network is a little more complex. The network is shares a public ledger called the "Block Chain." The ledger holds each bitcoin transaction ever conducted, which allows the user's computer to validate each transaction. This is important because it allows all Bitcoin users to have complete control of sending bitcoins from their own Bitcoin addresses.4


What are its Strengths and Weaknesses?

Strengths

  • Bitcoins have an intrinsic scarcity - meaning higher demand because there is a little quantity
  • Greater privacy
  • Secure - stealing funds is more difficult than typical currency5
  • Cuts back on transaction fees

Weaknesses

  • Bitcoins have no intrinsic value
  • Deflation of prices in a Bitcoin economy - A major reason not to depend on such a currency
  • All transactions are final
  • Bitcoin is extremely volatile - It’s extremely risky6
  • E-Wallets can be stolen

What Platform Does it Run on?

The cryptography of Bitcoin is open-source code, and is therefore available to any developer. For this reason, there are many different platforms that have been created for the buying and selling of Bitcoins. Some of the more notable ones are MT. Gox, BTC China, CampBX, BTX Trader, ICBIT, and Crypto-Trade.


Is there a cost for the user?

There is currently no cost to trade bitcoins, nor are there any transaction fees. On the wide array of Webservers and platforms that are used to trade bitcoins, some require you to have a subscription with their platforms because it offers additional services, such as transaction reports, market data, market charts, etc.


Are there Similar Ideas/Tools to Bitcoin?

There are other cryptocurrency options available, but Bitcoin seems to top the list in popularity beause vendors accept it the most. Some other examples are: LiteCoin, PeerCoin, NameCoin, PrimeCoin, QuarkCoin, and Ripple.