By now you’ve probably heard in the news and media about Bitcoin. What is it? Although a technical description of Bitcoin sounds like a foreign language, it boils down to a mathematical algorithm that only a computer can solve. This algorithm is a puzzle that has a difficulty, and the more puzzle pieces that are solved by computers around the world, the more the difficulty per puzzle piece increases. These pieces are the infamous Bitcoins, and they have a real-world currency value. Not only that, but there are only a finite amount of Bitcoins that can ever be produced — 21 million. The process of solving these mathematical problems leading to Bitcoins is called “mining”.
In the beginning, mining Bitcoins was a simple affair, accomplished by using one’s computer CPU to attack the Bitcoin puzzle. This was relatively simple, and the dollar value of Bitcoins was low. As the complexity of the Bitcoin mining process increased, it no longer became feasible to mine a Bitcoin block using CPUs alone. This ushered in the next generation of Bitcoin mining, which led miners to use their graphics card processors known as GPUs. The rise of GPU mining lead to increasing discovery of Bitcoin blocks, and their popularity rose in kind. Today, GPU mining has been eclipsed by an even more powerful technology using application specific integrated circuit (ASIC). These are processors built solely to crunch numbers related to the Bitcoin algorithm.
So why would one want to use Bitcoins (BTC)? By far the most popular reason is that they are virtually untraceable. Bitcoins are stored in digital wallets, and combined with software such as TOR and virtual private networks transactions using BTC are almost untraceable. The anonymous nature of BTC is its true power. Untied to any national currency or reserve, BTC is truly the currency of the internet.
Why has Bitcoin value seemed to skyrocket in the past few months? With its ever increasing popularity, Bitcoin markets have been upended by rampant speculation. Investors trying to make a quick buck have skewed Bitcoin’s value to unheard of extremes. Coupled with the meteoric rise in required computational power required to mine one single Bitcoin block, the days of the garage enthusiast has passed.
Bitcoin integration into everyday society is rapidly increasing. You may even have seen signs in shop windows advertising that Bitcoins are now accepted as payment. One day soon you will be able to pay for goods with a Bitcoin credit card. The revolutionary nature of Bitcoin makes it truly an economic game changer.