Bitcoin Trading

Bitcoin is a type of decentralised peer-to-peer currency. The decentralised part of this sentence refers to the fact that there is no central body organisation that controls or oversees the bitcoin network. Instead, the bitcoin network is effectively controlled and regulated by its users.

Instead, the bitcoin network is effectively controlled and regulated by its users. The best way to think of the difference between the bitcoin network and bitcoin as a currency is by thinking of the network itself as an electronic payment system such as PayPal or Skrill, but one that has its own virtual denomination – the bitcoin itself.

So where did bitcoin originate?

The concept behind bitcoin was first introduced to the technological world way back in the late 90s, just as the Internet and all the possibilities were beginning to take hold. It took 10 years however, before the actual protocol behind bitcoin was released. A mysterious individual or group of individuals that go by the name Satoshi Nakamoto designed, created and released the original bitcoin software. Speculation as to who Satoshi Nakamoto is continues to this day, and it is likely we will never find out is – or their – true identity.

The mystery surrounding bitcoins creation however, has not stopped it becoming a mainstream and widely accepted alternative to traditional fiat currency. A large number of institutions now accept bitcoin as payment for a wide variety of goods and services – including food, electronics and as a method of charitable donation. This is true for both online and off-line communities.

And where can you get bitcoin?

We will look at this in a little bit more detail in another one of our educational pieces, but in short, there are two primary methods of obtaining bitcoin. The first is called mining. As mentioned we will have a section devoted to mining, but put simply the term mining bitcoin refers to using the electronic computing power of a desktop PC or network of desktop PCs to solve complex mathematical problems. Once solved, the individual or network of individuals devoting the computing power to solving the calculations are rewarded with a certain number of bitcoin’s. The number is designed to decrease over time, making it more and more difficult to mine bitcoin. Second, you can purchase bitcoin on one of the numerous bitcoin exchanges currently available. These exchanges allow you to exchange traditional currency such as the US dollar or the Euro for a particular amount of bitcoin – with the exact number you receive dependent on the exchange-rate available at the time the transaction takes place.

The former of these two methods leads us to one of the most fascinating qualities of bitcoin. Whoever designed the software introduced a controlled supply element to the code. Unlike a fiat currency, where the central bank of a particular nation can just print more currency as and when required according to monetary policy, the number of bitcoin’s existence will never exceed 21 million. Those behind the creation of bitcoin chose this number because it is approximately in relation to the rate at which natural resource commodities (such as gold and silver) are mined. This controlled supply element offers a guard against many of the undesirable qualities that come with government and central bank intervention into traditional fiat currency transactions.

So why would you use bitcoin? Find out next…