Bitcoin is the first decentralized digital currency – it allows people to securely and directly send money on the Internet without banks or other third parties. It’s backed by a network of computers that verify and process transactions using cryptography, and record them in a public ledger called the blockchain.
The Economics of Bitcoin: Value, Volatility, and Market Dynamics
There are three main ways to get Bitcoins. You can buy them with ‘real’ money, or you can earn them by processing transactions for everyone else on the Bitcoin network – this is known as mining. Mining isn’t easy, and requires specialized computers that spend massive amounts of electricity (it’s estimated the global mining energy consumption is equivalent to Argentina and Norway). As a reward for their work, miners are awarded with Bitcoin for each transaction they process.
Once a Bitcoin transaction is confirmed, it can’t be reversed. This makes it very secure, and it also helps to prevent unauthorized double-spending, or spending Bitcoin you don’t own. Bitcoins are sent to and stored on so-called addresses, which are randomly seeming chains of 30 characters. It’s possible to link these addresses to real-world identities, but it’s not easy – and it’s completely optional.
Bitcoin is a new form of money that is becoming increasingly popular worldwide. While some still view it as a volatile investment, others appreciate its properties as a store of value, or medium of exchange. There are now hundreds of merchants across the globe that accept Bitcoin, including REEDS Jewelers in the US, and Richard Branson’s Virgin Galactic, which takes payment for flights on its space tourism missions in Bitcoin.