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Bitcoin Essay

1874 words - 8 pages

Once upon a time Marco Polo traveled across Southern Europe, the Middle East, the Gobi Desert, the Himalayan Mountains, and then found the palace of the emperor, Kubla Khan. Polo saw that Khan had many riches and noticed one particularly nice looking pot. He then asked Kubla Khan if he could take the pot back to Italy to show his friends the wealth of the Khan’s empire. Khan then asked for something in exchange for the pot. So, Polo went back across the Himalayas, the Gobi, the Middle East, and Southern Europe to get his grand piano to take back to Khan in exchange for the pot. Marco Polo had to go back to get the piano because he did not have a currency that would be able to represent the value of his other objects. Currency gives people the ability to measure the value of belongings in a common system that everyone can understand. It also provides the means of carrying an enormous amount of wealth in a very small volume. One other bonus to a currency system is a way to easily divide up wealth into smaller values without actually cutting apart the object, like someone would need to do with a grand piano for example. Currencies have actually been used for centuries in places with a central authority that would be able to regulate the manufacturing of the currency. Central authorities also serve as the median that held the backing to ensure the currency kept its value. However, in areas without the central authority to regulate the currency, a currency cannot exist and the inhabitants of that area must suffer because the government and/or banks cannot get their act together. The only way to get around this issue is to have a currency that doesn’t need a central authority and allows common people to take all aspects of economics into their own hands, which is done through Bitcoins.
Bitcoins are an electronic currency, or e-currency, created by Satoshi Nakamoto. Nakamoto is a pseudonym as far as the Bitcoin community is aware. He has not revealed any information about himself except his fake name, so he is not even necessarily a “he” but could be a “she” or even a “they.” Nakamoto created Bitcoins in 2008 and continued to advise the Bitcoin community until he turned the system over to the users in April 2011. Nakamoto's original essay, the first time anyone had ever heard of him, from 2008 outlines the programming of the system. The purpose of the essay is to show how “an electronic payment system based on cryptographic proof" allows "two willing parties to transact directly with each other without the need for a trusted third party” (Nakamoto). Before Bitcoins many programmers attempted to create e-currencies, but could not solve one problem called double-spending. Double-spending is e-currencies form of counterfeiting, and it could not be solved because there is no central authority to punish or stop counterfeits. Nakamoto's solution is to use “a peer-to-peer distributed timestamp server to generate computational proof of the chronological order...

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