What is Bitcoin?

What is Bitcoin?

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Bitcoin is a peer-to-peer version of electronic cash that allows payments to be made from one party to another, without any third party intermediary, such as a bank. For this to be possible, Bitcoin runs on a technology called the "blockchain." Bitcoin’s blockchain is a distributed ledger that publicly records all transactions for everyone to see. Because of this, people refer to the Bitcoin chain as a "Proof of Work" system. This is useful for solving transparency and dispute issues over what someone actually did with their money. Bitcoin itself is the world’s first decentralized currency, meaning it has no issuing entity and instead is made up of the Bitcoin protocol. This protocol is powered and run by a decentralized network of computers all over the world, via the internet. Bitcoin “miners,” people who join the Bitcoin network and function under the Bitcoin protocol, use computers’ literal computing power to solve very complex cryptographic equations. This is what secures each transaction and allows peers to send money directly to one another. As a reward for powering the math behind each transaction, the miner is given a small reward in Bitcoin, a reward that is directly funded by the people benefiting from the work (a.k.a. the Bitcoin users). Additional income is given to the miners for creating and developing new Bitcoins that go into the market. Each new Bitcoin needs to be mathematically constructed; once created, it enters the network via the miner. Each year, fewer new Bitcoins are released into the market (mined) until there are a total of 21 million Bitcoins in the circulating supply. As of today, there are approximately 17 million coins. This economic incentive is what insures Bitcoin transactions are always being processed.

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