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THE RISE OF BITCOIN

THE RISE OF BITCOIN

Unlike traditional currencies, Bitcoin is not issued or backed by any central authority, thus insulating it from reckless and dubious monetary policies.

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21.10.2017 kl: 18:39


By now I’m sure everyone has heard about Bitcoin—a decentralized cryptocurrency released in 2009 by its mysterious creator (or creators) who goes by the pseudonym Satoshi Nakamoto. Nakamoto initially published a manifesto in 2008 outlining the motivation behind Bitcoin and its supposed advantages over traditional currencies. On the heels of the worst economic crisis since the Great Depression, bitcoin was touted as an alternative to existing currencies, which are susceptible to manipulation by governments and banking systems. Unlike traditional currencies, bitcoin is not issued or backed by any central authority, thus insulating it from reckless and dubious monetary policies.

Bitcoin can be acquired in two ways: mining and trading. Of course the fastest and easiest way to acquire bitcoin is by purchasing it using traditional payment methods such as a debit or credit card on bitcoin exchanges like the now-defunct Mt. Gox, which filed for bankruptcy in 2014. Mining, as the name implies, is a tedious process which involves solving complex puzzles and compiling transactions into blocks. Whoever solves the puzzle first gets to place the next block on the block chain. The “miner” who successfully completes this process is rewarded with a newly released bitcoin.

Apart from having to crack complex puzzles, mining bitcoin requires a lot of time and serious computing power. Back when Bitcoin first came out, standard PCs were efficient enough to generate bitcoins. However, as more and more bitcoins are mined, the harder the mathematical problems become; thus, requiring more sophisticated (and expensive) hardware. While it is possible to mine using standard PCs, this is extremely inefficient and counterproductive. The power consumption alone that goes into mining bitcoin offsets the amount of bitcoin that could be generated, especially now that the number of available bitcoins has diminished significantly. According to tracking website Blockchain, they had recorded 982 megawatt hours of electricity consumption in just a single day of mining around the world, which is enough to power 31,000 American homes. Let that sink in.

Written by Tom Sangüeza


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