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Bitcoins Explained Essay

1375 words - 6 pages

Movies such as Fifth Element, Terminator, Matrix, and other dystopian futures are highly descriptive in their portrayal of the setting but they always seem to skip over one important detail, the currency in the future. They never seem to take into account the possible change in how currency functions and is exchanged. So, how will our money work in the future? Will it be encoded on electronic tattoos on our arms, will it stay in paper form as it is now or will it become digital.
In 2008 an anonymous user/s by the name of Satoshi Nakamoto published an idea on the internet for an electronic money system. After one year this idea came into existence; Bitcoin. Bitcoin is open sourced - the code is accessible for viewing- and every transaction and deposit is visible for viewing just like in a bank. But unlike a bank, everyone on the Bitcoin network has access to see that transaction or deposit so nothing is a secret. If someone wants to check back to see who gave someone else fifty Bitcoins, they can. In Bitcoin you are connected with complete strangers at all times so you must trust no one, but the system is designed so there is no trust involved by having mathematical functions protect every aspect of the program.
How do I acquire these Bitcoins? Is probably the first question on your mind. Bitcoins can be obtained one of two different ways. One way is to turn real money into Bitcoins at whatever the current exchange rate is. So I can take 1,000$ and if the current exchange rate is at 500$ to one Bitcoin, then I can get 2 Bitcoins. The other way is to mine for Bitcoins. Mining Bitcoins involves using special computer programs to solve math problems and the user earns a proportionate amount of bitcoins as a result. The Bitcoin program is set up so that the math problems increase in difficulty and thus require more time and effort of the programs to solve. Over time people stopped using the processors in their computers and began using video game graphics cards and computer chips specifically specialized for mining Bitcoins. The newest developments in Bitcoin mining include people making apps and when other people download and use the apps, it’s mining Bitcoins for the maker of the app.
Now that I’ve acquired some Bitcoins, how do I give them to other people? If you want to pay someone in Bitcoins then you relay to the Bitcoin network that you want your account balance to go down and the other person's account balance to go up. Once the change in account balances is broadcasted, every copy of that account in the Bitcoin network is changed accordingly.
How do I know someone else didn’t hack my Bitcoin account and started using my Bitcoins? Well, if you want to spend or exchange funds in Bitcoin you must have a certain digital signature, such as a regular signature in real life. The digital signature changes every time a transaction is made so it is impossible to hack. There is also no need for worry that you may accidentally use the same digital...

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