Bitcoin explained: the digital currency making millionaires – ABC News (Australian Broadcasting Corporation)

Bitcoin explained: the digital currency making millionaires

Updated December 09, two thousand fifteen 16:04:38

The digital currency bitcoin has exploded in popularity since it began in 2009.

Where once a single bitcoin was worth a few cents online, it is now worth about $575 per coin (December 2015). During its peak in two thousand thirteen it hit more than $1,000 per coin, creating millionaires in the process.

There have been many reported cases where people mined thousands of relatively worthless bitcoins as a hobby years ago, only to now realise they are rich.

One IT worker even threw out a hard drive containing 7,500 bitcoins, only to later find out his haul would have been worth $8.Two million.

If you want to know whether it is worth getting into and you cannot tell a bitcoin from a blockchain, read our explainer to see how the currency works.

What is bitcoin?

Bitcoin key points

  • A decentralised cryptocurrency
  • Released as a working beta in 2009
  • The digital currency can be traded for other currencies or real world goods
  • It can be created (mined) by computers set to the task of solving mathematical ‘blocks’
  • There is a cap of just under twenty one million bitcoins
  • Coin transactions and ownership recorded in a public ledger called the blockchain
  • Bitcoins are secured in your digital wallet

Bitcoin is a digital cryptocurrency that is decentralised and operates using a peer-to-peer network.

Unlike other currencies, it has no central authority or government-based backing.

It is a digital currency and is essentially a code that is traded inbetween two people.

It was created by someone under the pseudonym of Satoshi Nakamoto and released as a working beta in 2009.

Satoshi’s true identity remains a mystery as he disappeared from the scene in two thousand ten after seemingly handing over the reins to Gavin Andresen, the chief scientist at the Bitcoin Foundation.

During the early years some people collected thousands of bitcoins each, mostly at a worth of less than a dollar per coin.

Bitcoin was a niche curiosity, but after mainstream coverage and several market surges and crashes it was worth almost $US1,000 per bitcoin (in November 2013).

It can be traded for other currencies or real world goods and fresh bitcoins can be created by ‘mining’.

There is a limit of just under twenty one million bitcoins that can be created. Once the limit is reached, no more bitcoins can be made.

However, a single bitcoin can be subdivided as far down as the eighth decimal place (0.00000001BTC) to buy smaller goods using just a fraction of the bitcoin.

The entire currency is underpinned by a public ledger called the blockchain, which records who possesses what bitcoins and all transactions ever made in the currency.

Whenever a transaction is made it is added to the blockchain which is confirmed by other users using the peer-to-peer network.

Due to the nature of the blockchain, transactions cannot be reversed, only fresh transactions can be recorded to the chain.

Bitcoins are essentially codes added to the blockchain, which are secured using encrypted digital wallets.

A wallet operates by having a public address and a private key. The public address is used by other people to send bitcoins to your wallet, whereas the private key is held by the holder and used to access and make payments from the wallet.

How do you create bitcoins?

When a user sends bitcoins to another user the transaction needs to be confirmed as valid and added to the public ledger of transactions and ownership – the blockchain – using a series of sophisticated computations.

Fresh bitcoins are rewarded to users who use their home computers or specialised hardware connected to the network to carry out these calculations.

This time-intensive pursuit is known as bitcoin mining.

The most latest transactions made on the network are bundled up into a transaction ‘block’, which is solved toughly every ten minutes.

Once a user solves the mathematical problem to find a valid hash key it is added to the blockchain, verifying bitcoin transactions inbetween users, while at the same time rewarding the miner with fresh bitcoins.

It can take a while for miners to reap prizes as only the very first user to solve the block by finding one of a number of valid hash keys is rewarded with bitcoins.

During the early days of bitcoin in 2010-2011 a common household computer would have been powerful enough to mine for dozens of fresh coins using its CPU or GPU.

But that is not the case today.

The currency automatically regulates the difficulty of the mathematical problem (adding complexity to the hash value computers need to find) as well as the number of bitcoins received as a prize.

If a lot of people are connected to the network to mine for bitcoins the difficulty of solving a block increases – this is known as the hash rate.

Similarly, it decreases when less people are seeking fresh bitcoins.

The number of bitcoins rewarded also adjusts with an end result that means every four years only half the amount of coins created in the previous four years can be made.

This will proceed until all twenty one million bitcoins have been mined.

According to Bitcoin Charts, a total of twelve million bitcoins have been made as of November 2013.

Recently, the invention of specialised computers used solely for mining has dramatically enlargened the difficulty of obtaining a bitcoin.

These expensive machines mine for coins 24/7 and can perform the needed computations hundreds of times quicker than a standard home computer.

Bitcoins can be mined solo or as part of a pool, but even then the bitcoin or fraction of the coin you receive will likely not be enough to cover the electro-therapy cost.

Bitcoin mining was enormously effortless when the network very first began, but it is now out of the area of common home computers.

How do you buy bitcoins?

Bitcoins can be bought from currency exchanges if you lack the computer hardware to mine for the currency or do not know anyone personally who will sell to you.

These exchanges let you buy and sell bitcoins for other real world currencies.

They make money by skimming a fee from the transactions.

Some shops have also begun selling physical ‘bitcoins’, which are minted but do not hold any particular value in the slug.

They come with a code for one bitcoin embedded in the physical coin that can be redeemed in a digital wallet.

Is it safe?

The bitcoin market has undergone a series of dramatic booms and busts. It is anything but stable.

At the commence of two thousand eleven it was worth about thirty US cents and by the commence of two thousand thirteen it was worth $US13.50.

In February it was trading for a high of $US32, then in March it hit $92, and in April $215, before pulling down in the space of a week back down to $US65.

After a rocky few months it climbed from $US212 on November one to $US960 by November 27.

This should indicate that the currency is presently in a bubble.

The exchange price proceeds to fluctuate insanely day to day, sometimes by hundreds of dollars.

Early adopters who mined thousands of bitcoins rather quickly and cheaply stand to make hundreds of thousands of dollars, even millions, but for everyone else it will be a firmer proposition to buy into.

Bitcoins have also been the concentrate of hacking attacks.

A common tactic is for a hacking group to run a denial of service attack against a popular bitcoin exchange, thus bringing down the website temporarily.

Bitcoin owners sell their coins at other exchanges in the funk, which brings down the price, and the hackers and opportunists hop in and buy them before the price stabilises and the attacked exchange comes back online.

Hackers and scammers have also successfully managed to rob bitcoin mining pools.

The bitcoins were wielded by users that had joined TradeFortress’s mining pool.

While TradeFortress denies it was an inwards job, there have been some cases of mining pools being set up to generate bitcoins with the help of other users only for the pool to vanish with all their shares of coins.

Thefts are made all the more worse as there is no way to switch roles a bitcoin transaction and tracing a transaction is unlikely.

The US Congress has commenced holding a series of hearings to discuss the implications of virtual currencies like bitcoin.

While the US government says there is nothing illegal about virtual currencies, the anonymous nature of them make them popular for purchasing illegal goods.

This year the FBI shut down Silk Road – an online black market selling drugs and other illegal products that accepted bitcoins as a payment.

Other black markets on the dark web that sell things such as firearms and child manhandle material also accept bitcoins.

But the digital currency is not just for the shady parts of the internet, it is gaining acceptance from mainstream websites and even real world businesses.

Richard Branson has also begun accepting bitcoin payments for seats on upcoming flights into space on Cherry Galactic.

But despite growing in acceptance, the currency value is unstable and like with all financial matters people will need to do their own research before determining whether to invest the time and money.

Bitcoin explained: the digital currency making millionaires – ABC News (Australian Broadcasting Corporation)

Bitcoin explained: the digital currency making millionaires

Updated December 09, two thousand fifteen 16:04:38

The digital currency bitcoin has exploded in popularity since it began in 2009.

Where once a single bitcoin was worth a few cents online, it is now worth about $575 per coin (December 2015). During its peak in two thousand thirteen it hit more than $1,000 per coin, creating millionaires in the process.

There have been many reported cases where people mined thousands of relatively worthless bitcoins as a hobby years ago, only to now realise they are rich.

One IT worker even threw out a hard drive containing 7,500 bitcoins, only to later find out his haul would have been worth $8.Two million.

If you want to know whether it is worth getting into and you cannot tell a bitcoin from a blockchain, read our explainer to see how the currency works.

What is bitcoin?

Bitcoin key points

  • A decentralised cryptocurrency
  • Released as a working beta in 2009
  • The digital currency can be traded for other currencies or real world goods
  • It can be created (mined) by computers set to the task of solving mathematical ‘blocks’
  • There is a cap of just under twenty one million bitcoins
  • Coin transactions and ownership recorded in a public ledger called the blockchain
  • Bitcoins are secured in your digital wallet

Bitcoin is a digital cryptocurrency that is decentralised and operates using a peer-to-peer network.

Unlike other currencies, it has no central authority or government-based backing.

It is a digital currency and is essentially a code that is traded inbetween two people.

It was created by someone under the pseudonym of Satoshi Nakamoto and released as a working beta in 2009.

Satoshi’s true identity remains a mystery as he disappeared from the scene in two thousand ten after seemingly handing over the reins to Gavin Andresen, the chief scientist at the Bitcoin Foundation.

During the early years some people collected thousands of bitcoins each, mostly at a worth of less than a dollar per coin.

Bitcoin was a niche curiosity, but after mainstream coverage and several market surges and crashes it was worth almost $US1,000 per bitcoin (in November 2013).

It can be traded for other currencies or real world goods and fresh bitcoins can be created by ‘mining’.

There is a limit of just under twenty one million bitcoins that can be created. Once the limit is reached, no more bitcoins can be made.

However, a single bitcoin can be subdivided as far down as the eighth decimal place (0.00000001BTC) to buy smaller goods using just a fraction of the bitcoin.

The entire currency is underpinned by a public ledger called the blockchain, which records who possesses what bitcoins and all transactions ever made in the currency.

Whenever a transaction is made it is added to the blockchain which is confirmed by other users using the peer-to-peer network.

Due to the nature of the blockchain, transactions cannot be reversed, only fresh transactions can be recorded to the chain.

Bitcoins are essentially codes added to the blockchain, which are secured using encrypted digital wallets.

A wallet operates by having a public address and a private key. The public address is used by other people to send bitcoins to your wallet, whereas the private key is held by the possessor and used to access and make payments from the wallet.

How do you create bitcoins?

When a user sends bitcoins to another user the transaction needs to be confirmed as valid and added to the public ledger of transactions and ownership – the blockchain – using a series of sophisticated computations.

Fresh bitcoins are rewarded to users who use their home computers or specialised hardware connected to the network to carry out these calculations.

This time-intensive pursuit is known as bitcoin mining.

The most latest transactions made on the network are bundled up into a transaction ‘block’, which is solved toughly every ten minutes.

Once a user solves the mathematical problem to find a valid hash key it is added to the blockchain, verifying bitcoin transactions inbetween users, while at the same time rewarding the miner with fresh bitcoins.

It can take a while for miners to reap prizes as only the very first user to solve the block by finding one of a number of valid hash keys is rewarded with bitcoins.

During the early days of bitcoin in 2010-2011 a common household computer would have been powerful enough to mine for dozens of fresh coins using its CPU or GPU.

But that is not the case today.

The currency automatically regulates the difficulty of the mathematical problem (adding complexity to the hash value computers need to find) as well as the number of bitcoins received as a prize.

If a lot of people are connected to the network to mine for bitcoins the difficulty of solving a block increases – this is known as the hash rate.

Similarly, it decreases when less people are seeking fresh bitcoins.

The number of bitcoins rewarded also adjusts with an end result that means every four years only half the amount of coins created in the previous four years can be made.

This will proceed until all twenty one million bitcoins have been mined.

According to Bitcoin Charts, a total of twelve million bitcoins have been made as of November 2013.

Recently, the invention of specialised computers used solely for mining has dramatically enlargened the difficulty of obtaining a bitcoin.

These expensive machines mine for coins 24/7 and can perform the needed computations hundreds of times swifter than a standard home computer.

Bitcoins can be mined solo or as part of a pool, but even then the bitcoin or fraction of the coin you receive will likely not be enough to cover the electro-stimulation cost.

Bitcoin mining was utterly effortless when the network very first began, but it is now out of the area of common home computers.

How do you buy bitcoins?

Bitcoins can be bought from currency exchanges if you lack the computer hardware to mine for the currency or do not know anyone personally who will sell to you.

These exchanges let you buy and sell bitcoins for other real world currencies.

They make money by skimming a fee from the transactions.

Some shops have also begun selling physical ‘bitcoins’, which are minted but do not hold any particular value in the slug.

They come with a code for one bitcoin embedded in the physical coin that can be redeemed in a digital wallet.

Is it safe?

The bitcoin market has undergone a series of dramatic booms and busts. It is anything but stable.

At the embark of two thousand eleven it was worth about thirty US cents and by the commence of two thousand thirteen it was worth $US13.50.

In February it was trading for a high of $US32, then in March it hit $92, and in April $215, before ripping off in the space of a week back down to $US65.

After a rocky few months it climbed from $US212 on November one to $US960 by November 27.

This should indicate that the currency is presently in a bubble.

The exchange price proceeds to fluctuate frantically day to day, sometimes by hundreds of dollars.

Early adopters who mined thousands of bitcoins rather quickly and cheaply stand to make hundreds of thousands of dollars, even millions, but for everyone else it will be a tighter proposition to buy into.

Bitcoins have also been the concentrate of hacking attacks.

A common tactic is for a hacking group to run a denial of service attack against a popular bitcoin exchange, thus bringing down the website temporarily.

Bitcoin owners sell their coins at other exchanges in the scare, which brings down the price, and the hackers and opportunists leap in and buy them before the price stabilises and the attacked exchange comes back online.

Hackers and scammers have also successfully managed to rob bitcoin mining pools.

The bitcoins were possessed by users that had joined TradeFortress’s mining pool.

While TradeFortress denies it was an inwards job, there have been some cases of mining pools being set up to generate bitcoins with the help of other users only for the pool to vanish with all their shares of coins.

Thefts are made all the more worse as there is no way to switch roles a bitcoin transaction and tracing a transaction is unlikely.

The US Congress has began holding a series of hearings to discuss the implications of virtual currencies like bitcoin.

While the US government says there is nothing illegal about virtual currencies, the anonymous nature of them make them popular for purchasing illegal goods.

This year the FBI shut down Silk Road – an online black market selling drugs and other illegal products that accepted bitcoins as a payment.

Other black markets on the dark web that sell things such as firearms and child manhandle material also accept bitcoins.

But the digital currency is not just for the shady parts of the internet, it is gaining acceptance from mainstream websites and even real world businesses.

Richard Branson has also begun accepting bitcoin payments for seats on upcoming flights into space on Cherry Galactic.

But despite growing in acceptance, the currency value is unstable and like with all financial matters people will need to do their own research before determining whether to invest the time and money.

Bitcoin explained: the digital currency making millionaires – ABC News (Australian Broadcasting Corporation)

Bitcoin explained: the digital currency making millionaires

Updated December 09, two thousand fifteen 16:04:38

The digital currency bitcoin has exploded in popularity since it began in 2009.

Where once a single bitcoin was worth a few cents online, it is now worth about $575 per coin (December 2015). During its peak in two thousand thirteen it hit more than $1,000 per coin, creating millionaires in the process.

There have been many reported cases where people mined thousands of relatively worthless bitcoins as a hobby years ago, only to now realise they are rich.

One IT worker even threw out a hard drive containing 7,500 bitcoins, only to later find out his haul would have been worth $8.Two million.

If you want to know whether it is worth getting into and you cannot tell a bitcoin from a blockchain, read our explainer to see how the currency works.

What is bitcoin?

Bitcoin key points

  • A decentralised cryptocurrency
  • Released as a working beta in 2009
  • The digital currency can be traded for other currencies or real world goods
  • It can be created (mined) by computers set to the task of solving mathematical ‘blocks’
  • There is a cap of just under twenty one million bitcoins
  • Coin transactions and ownership recorded in a public ledger called the blockchain
  • Bitcoins are secured in your digital wallet

Bitcoin is a digital cryptocurrency that is decentralised and operates using a peer-to-peer network.

Unlike other currencies, it has no central authority or government-based backing.

It is a digital currency and is essentially a code that is traded inbetween two people.

It was created by someone under the pseudonym of Satoshi Nakamoto and released as a working beta in 2009.

Satoshi’s true identity remains a mystery as he disappeared from the scene in two thousand ten after seemingly handing over the reins to Gavin Andresen, the chief scientist at the Bitcoin Foundation.

During the early years some people collected thousands of bitcoins each, mostly at a worth of less than a dollar per coin.

Bitcoin was a niche curiosity, but after mainstream coverage and several market surges and crashes it was worth almost $US1,000 per bitcoin (in November 2013).

It can be traded for other currencies or real world goods and fresh bitcoins can be created by ‘mining’.

There is a limit of just under twenty one million bitcoins that can be created. Once the limit is reached, no more bitcoins can be made.

However, a single bitcoin can be subdivided as far down as the eighth decimal place (0.00000001BTC) to buy smaller goods using just a fraction of the bitcoin.

The entire currency is underpinned by a public ledger called the blockchain, which records who possesses what bitcoins and all transactions ever made in the currency.

Whenever a transaction is made it is added to the blockchain which is confirmed by other users using the peer-to-peer network.

Due to the nature of the blockchain, transactions cannot be reversed, only fresh transactions can be recorded to the chain.

Bitcoins are essentially codes added to the blockchain, which are secured using encrypted digital wallets.

A wallet operates by having a public address and a private key. The public address is used by other people to send bitcoins to your wallet, whereas the private key is held by the proprietor and used to access and make payments from the wallet.

How do you create bitcoins?

When a user sends bitcoins to another user the transaction needs to be confirmed as valid and added to the public ledger of transactions and ownership – the blockchain – using a series of elaborate computations.

Fresh bitcoins are rewarded to users who use their home computers or specialised hardware connected to the network to carry out these calculations.

This time-intensive pursuit is known as bitcoin mining.

The most latest transactions made on the network are bundled up into a transaction ‘block’, which is solved toughly every ten minutes.

Once a user solves the mathematical problem to find a valid hash key it is added to the blockchain, verifying bitcoin transactions inbetween users, while at the same time rewarding the miner with fresh bitcoins.

It can take a while for miners to reap prizes as only the very first user to solve the block by finding one of a number of valid hash keys is rewarded with bitcoins.

During the early days of bitcoin in 2010-2011 a common household computer would have been powerful enough to mine for dozens of fresh coins using its CPU or GPU.

But that is not the case today.

The currency automatically regulates the difficulty of the mathematical problem (adding complexity to the hash value computers need to find) as well as the number of bitcoins received as a prize.

If a lot of people are connected to the network to mine for bitcoins the difficulty of solving a block increases – this is known as the hash rate.

Similarly, it decreases when less people are seeking fresh bitcoins.

The number of bitcoins rewarded also adjusts with an end result that means every four years only half the amount of coins created in the previous four years can be made.

This will proceed until all twenty one million bitcoins have been mined.

According to Bitcoin Charts, a total of twelve million bitcoins have been made as of November 2013.

Recently, the invention of specialised computers used solely for mining has dramatically enlargened the difficulty of obtaining a bitcoin.

These expensive machines mine for coins 24/7 and can perform the needed computations hundreds of times swifter than a standard home computer.

Bitcoins can be mined solo or as part of a pool, but even then the bitcoin or fraction of the coin you receive will likely not be enough to cover the tens unit cost.

Bitcoin mining was utterly effortless when the network very first began, but it is now out of the field of common home computers.

How do you buy bitcoins?

Bitcoins can be bought from currency exchanges if you lack the computer hardware to mine for the currency or do not know anyone personally who will sell to you.

These exchanges let you buy and sell bitcoins for other real world currencies.

They make money by skimming a fee from the transactions.

Some shops have also begun selling physical ‘bitcoins’, which are minted but do not hold any particular value in the slug.

They come with a code for one bitcoin embedded in the physical coin that can be redeemed in a digital wallet.

Is it safe?

The bitcoin market has undergone a series of dramatic booms and busts. It is anything but stable.

At the commence of two thousand eleven it was worth about thirty US cents and by the begin of two thousand thirteen it was worth $US13.50.

In February it was trading for a high of $US32, then in March it hit $92, and in April $215, before ripping off in the space of a week back down to $US65.

After a rocky few months it climbed from $US212 on November one to $US960 by November 27.

This should indicate that the currency is presently in a bubble.

The exchange price proceeds to fluctuate insanely day to day, sometimes by hundreds of dollars.

Early adopters who mined thousands of bitcoins rather quickly and cheaply stand to make hundreds of thousands of dollars, even millions, but for everyone else it will be a firmer proposition to buy into.

Bitcoins have also been the concentrate of hacking attacks.

A common tactic is for a hacking group to run a denial of service attack against a popular bitcoin exchange, thus bringing down the website temporarily.

Bitcoin owners sell their coins at other exchanges in the fright, which brings down the price, and the hackers and opportunists leap in and buy them before the price stabilises and the attacked exchange comes back online.

Hackers and scammers have also successfully managed to rob bitcoin mining pools.

The bitcoins were possessed by users that had joined TradeFortress’s mining pool.

While TradeFortress denies it was an inwards job, there have been some cases of mining pools being set up to generate bitcoins with the help of other users only for the pool to vanish with all their shares of coins.

Thefts are made all the more worse as there is no way to switch roles a bitcoin transaction and tracing a transaction is unlikely.

The US Congress has began holding a series of hearings to discuss the implications of virtual currencies like bitcoin.

While the US government says there is nothing illegal about virtual currencies, the anonymous nature of them make them popular for purchasing illegal goods.

This year the FBI shut down Silk Road – an online black market selling drugs and other illegal products that accepted bitcoins as a payment.

Other black markets on the dark web that sell things such as firearms and child manhandle material also accept bitcoins.

But the digital currency is not just for the shady parts of the internet, it is gaining acceptance from mainstream websites and even real world businesses.

Richard Branson has also begun accepting bitcoin payments for seats on upcoming flights into space on Cherry Galactic.

But despite growing in acceptance, the currency value is unstable and like with all financial matters people will need to do their own research before determining whether to invest the time and money.

Bitcoin explained: the digital currency making millionaires – ABC News (Australian Broadcasting Corporation)

Bitcoin explained: the digital currency making millionaires

The digital currency bitcoin has exploded in popularity since it began in 2009.

Where once a single bitcoin was worth a few cents online, it is now worth about $575 per coin (December 2015). During its peak in two thousand thirteen it hit more than $1,000 per coin, creating millionaires in the process.

There have been many reported cases where people mined thousands of relatively worthless bitcoins as a hobby years ago, only to now realise they are rich.

One IT worker even threw out a hard drive containing 7,500 bitcoins, only to later find out his haul would have been worth $8.Two million.

If you want to know whether it is worth getting into and you cannot tell a bitcoin from a blockchain, read our explainer to see how the currency works.

What is bitcoin?

Bitcoin key points

  • A decentralised cryptocurrency
  • Released as a working beta in 2009
  • The digital currency can be traded for other currencies or real world goods
  • It can be created (mined) by computers set to the task of solving mathematical ‘blocks’
  • There is a cap of just under twenty one million bitcoins
  • Coin transactions and ownership recorded in a public ledger called the blockchain
  • Bitcoins are secured in your digital wallet

Bitcoin is a digital cryptocurrency that is decentralised and operates using a peer-to-peer network.

Unlike other currencies, it has no central authority or government-based backing.

It is a digital currency and is essentially a code that is traded inbetween two people.

It was created by someone under the pseudonym of Satoshi Nakamoto and released as a working beta in 2009.

Satoshi’s true identity remains a mystery as he disappeared from the scene in two thousand ten after seemingly handing over the reins to Gavin Andresen, the chief scientist at the Bitcoin Foundation.

During the early years some people collected thousands of bitcoins each, mostly at a worth of less than a dollar per coin.

Bitcoin was a niche curiosity, but after mainstream coverage and several market surges and crashes it was worth almost $US1,000 per bitcoin (in November 2013).

It can be traded for other currencies or real world goods and fresh bitcoins can be created by ‘mining’.

There is a limit of just under twenty one million bitcoins that can be created. Once the limit is reached, no more bitcoins can be made.

However, a single bitcoin can be subdivided as far down as the eighth decimal place (0.00000001BTC) to buy smaller goods using just a fraction of the bitcoin.

The entire currency is underpinned by a public ledger called the blockchain, which records who possesses what bitcoins and all transactions ever made in the currency.

Whenever a transaction is made it is added to the blockchain which is confirmed by other users using the peer-to-peer network.

Due to the nature of the blockchain, transactions cannot be reversed, only fresh transactions can be recorded to the chain.

Bitcoins are essentially codes added to the blockchain, which are secured using encrypted digital wallets.

A wallet operates by having a public address and a private key. The public address is used by other people to send bitcoins to your wallet, whereas the private key is held by the holder and used to access and make payments from the wallet.

Outward Link Zeega: Bitcoins – Free money?

How do you create bitcoins?

Photo Specialised bitcoin mining hardware has made generating coins on average home computers unprofitable.

When a user sends bitcoins to another user the transaction needs to be confirmed as valid and added to the public ledger of transactions and ownership – the blockchain – using a series of elaborate computations.

Fresh bitcoins are rewarded to users who use their home computers or specialised hardware connected to the network to carry out these calculations.

This time-intensive pursuit is known as bitcoin mining.

The most latest transactions made on the network are bundled up into a transaction ‘block’, which is solved toughly every ten minutes.

Once a user solves the mathematical problem to find a valid hash key it is added to the blockchain, verifying bitcoin transactions inbetween users, while at the same time rewarding the miner with fresh bitcoins.

It can take a while for miners to reap prizes as only the very first user to solve the block by finding one of a number of valid hash keys is rewarded with bitcoins.

During the early days of bitcoin in 2010-2011 a common household computer would have been powerful enough to mine for dozens of fresh coins using its CPU or GPU.

But that is not the case today.

The currency automatically regulates the difficulty of the mathematical problem (adding complexity to the hash value computers need to find) as well as the number of bitcoins received as a prize.

If a lot of people are connected to the network to mine for bitcoins the difficulty of solving a block increases – this is known as the hash rate.

Similarly, it decreases when less people are seeking fresh bitcoins.

The number of bitcoins rewarded also adjusts with an end result that means every four years only half the amount of coins created in the previous four years can be made.

This will proceed until all twenty one million bitcoins have been mined.

According to Bitcoin Charts, a total of twelve million bitcoins have been made as of November 2013.

Recently, the invention of specialised computers used solely for mining has dramatically enhanced the difficulty of obtaining a bitcoin.

These expensive machines mine for coins 24/7 and can perform the needed computations hundreds of times swifter than a standard home computer.

Bitcoins can be mined solo or as part of a pool, but even then the bitcoin or fraction of the coin you receive will likely not be enough to cover the electro-stimulation cost.

Bitcoin mining was utterly effortless when the network very first began, but it is now out of the sphere of common home computers.

How do you buy bitcoins?

Photo Some shops sell physical ‘bitcoins’ that come with a bitcoin code that can be redeemed online.

Bitcoins can be bought from currency exchanges if you lack the computer hardware to mine for the currency or do not know anyone personally who will sell to you.

These exchanges let you buy and sell bitcoins for other real world currencies.

They make money by skimming a fee from the transactions.

Some shops have also begun selling physical ‘bitcoins’, which are minted but do not hold any particular value in the slug.

They come with a code for one bitcoin embedded in the physical coin that can be redeemed in a digital wallet.

Is it safe?

Photo Bitcoin welcome: The currency is being accepted in shops and online.

The bitcoin market has undergone a series of dramatic booms and busts. It is anything but stable.

At the commence of two thousand eleven it was worth about thirty US cents and by the begin of two thousand thirteen it was worth $US13.50.

In February it was trading for a high of $US32, then in March it hit $92, and in April $215, before ripping off in the space of a week back down to $US65.

After a rocky few months it climbed from $US212 on November one to $US960 by November 27.

This should indicate that the currency is presently in a bubble.

The exchange price proceeds to fluctuate frantically day to day, sometimes by hundreds of dollars.

Early adopters who mined thousands of bitcoins rather quickly and cheaply stand to make hundreds of thousands of dollars, even millions, but for everyone else it will be a firmer proposition to buy into.

Bitcoins have also been the concentrate of hacking attacks.

A common tactic is for a hacking group to run a denial of service attack against a popular bitcoin exchange, thus bringing down the website temporarily.

Bitcoin owners sell their coins at other exchanges in the fright, which brings down the price, and the hackers and opportunists hop in and buy them before the price stabilises and the attacked exchange comes back online.

Hackers and scammers have also successfully managed to rob bitcoin mining pools.

The bitcoins were wielded by users that had joined TradeFortress’s mining pool.

While TradeFortress denies it was an inwards job, there have been some cases of mining pools being set up to generate bitcoins with the help of other users only for the pool to vanish with all their shares of coins.

Thefts are made all the more worse as there is no way to switch sides a bitcoin transaction and tracing a transaction is unlikely.

Photo The world’s very first bitcoin ATM opened up in Vancouver, Canada, in October 2013.

The US Congress has embarked holding a series of hearings to discuss the implications of virtual currencies like bitcoin.

While the US government says there is nothing illegal about virtual currencies, the anonymous nature of them make them popular for purchasing illegal goods.

This year the FBI shut down Silk Road – an online black market selling drugs and other illegal products that accepted bitcoins as a payment.

Other black markets on the dark web that sell things such as firearms and child manhandle material also accept bitcoins.

But the digital currency is not just for the shady parts of the internet, it is gaining acceptance from mainstream websites and even real world businesses.

Richard Branson has also begun accepting bitcoin payments for seats on upcoming flights into space on Cherry Galactic.

But despite growing in acceptance, the currency value is unstable and like with all financial matters people will need to do their own research before determining whether to invest the time and money.

Bitcoin explained: the digital currency making millionaires – ABC News (Australian Broadcasting Corporation)

Bitcoin explained: the digital currency making millionaires

The digital currency bitcoin has exploded in popularity since it began in 2009.

Where once a single bitcoin was worth a few cents online, it is now worth about $575 per coin (December 2015). During its peak in two thousand thirteen it hit more than $1,000 per coin, creating millionaires in the process.

There have been many reported cases where people mined thousands of relatively worthless bitcoins as a hobby years ago, only to now realise they are rich.

One IT worker even threw out a hard drive containing 7,500 bitcoins, only to later find out his haul would have been worth $8.Two million.

If you want to know whether it is worth getting into and you cannot tell a bitcoin from a blockchain, read our explainer to see how the currency works.

What is bitcoin?

Bitcoin key points

  • A decentralised cryptocurrency
  • Released as a working beta in 2009
  • The digital currency can be traded for other currencies or real world goods
  • It can be created (mined) by computers set to the task of solving mathematical ‘blocks’
  • There is a cap of just under twenty one million bitcoins
  • Coin transactions and ownership recorded in a public ledger called the blockchain
  • Bitcoins are secured in your digital wallet

Bitcoin is a digital cryptocurrency that is decentralised and operates using a peer-to-peer network.

Unlike other currencies, it has no central authority or government-based backing.

It is a digital currency and is essentially a code that is traded inbetween two people.

It was created by someone under the pseudonym of Satoshi Nakamoto and released as a working beta in 2009.

Satoshi’s true identity remains a mystery as he disappeared from the scene in two thousand ten after seemingly handing over the reins to Gavin Andresen, the chief scientist at the Bitcoin Foundation.

During the early years some people collected thousands of bitcoins each, mostly at a worth of less than a dollar per coin.

Bitcoin was a niche curiosity, but after mainstream coverage and several market surges and crashes it was worth almost $US1,000 per bitcoin (in November 2013).

It can be traded for other currencies or real world goods and fresh bitcoins can be created by ‘mining’.

There is a limit of just under twenty one million bitcoins that can be created. Once the limit is reached, no more bitcoins can be made.

However, a single bitcoin can be subdivided as far down as the eighth decimal place (0.00000001BTC) to buy smaller goods using just a fraction of the bitcoin.

The entire currency is underpinned by a public ledger called the blockchain, which records who possesses what bitcoins and all transactions ever made in the currency.

Whenever a transaction is made it is added to the blockchain which is confirmed by other users using the peer-to-peer network.

Due to the nature of the blockchain, transactions cannot be reversed, only fresh transactions can be recorded to the chain.

Bitcoins are essentially codes added to the blockchain, which are secured using encrypted digital wallets.

A wallet operates by having a public address and a private key. The public address is used by other people to send bitcoins to your wallet, whereas the private key is held by the holder and used to access and make payments from the wallet.

Outer Link Zeega: Bitcoins – Free money?

How do you create bitcoins?

Photo Specialised bitcoin mining hardware has made generating coins on average home computers unprofitable.

When a user sends bitcoins to another user the transaction needs to be confirmed as valid and added to the public ledger of transactions and ownership – the blockchain – using a series of elaborate computations.

Fresh bitcoins are rewarded to users who use their home computers or specialised hardware connected to the network to carry out these calculations.

This time-intensive pursuit is known as bitcoin mining.

The most latest transactions made on the network are bundled up into a transaction ‘block’, which is solved harshly every ten minutes.

Once a user solves the mathematical problem to find a valid hash key it is added to the blockchain, verifying bitcoin transactions inbetween users, while at the same time rewarding the miner with fresh bitcoins.

It can take a while for miners to reap prizes as only the very first user to solve the block by finding one of a number of valid hash keys is rewarded with bitcoins.

During the early days of bitcoin in 2010-2011 a common household computer would have been powerful enough to mine for dozens of fresh coins using its CPU or GPU.

But that is not the case today.

The currency automatically regulates the difficulty of the mathematical problem (adding complexity to the hash value computers need to find) as well as the number of bitcoins received as a prize.

If a lot of people are connected to the network to mine for bitcoins the difficulty of solving a block increases – this is known as the hash rate.

Similarly, it decreases when less people are seeking fresh bitcoins.

The number of bitcoins rewarded also adjusts with an end result that means every four years only half the amount of coins created in the previous four years can be made.

This will proceed until all twenty one million bitcoins have been mined.

According to Bitcoin Charts, a total of twelve million bitcoins have been made as of November 2013.

Recently, the invention of specialised computers used solely for mining has dramatically enhanced the difficulty of obtaining a bitcoin.

These expensive machines mine for coins 24/7 and can perform the needed computations hundreds of times swifter than a standard home computer.

Bitcoins can be mined solo or as part of a pool, but even then the bitcoin or fraction of the coin you receive will likely not be enough to cover the violet wand cost.

Bitcoin mining was enormously effortless when the network very first began, but it is now out of the field of common home computers.

How do you buy bitcoins?

Photo Some shops sell physical ‘bitcoins’ that come with a bitcoin code that can be redeemed online.

Bitcoins can be bought from currency exchanges if you lack the computer hardware to mine for the currency or do not know anyone personally who will sell to you.

These exchanges let you buy and sell bitcoins for other real world currencies.

They make money by skimming a fee from the transactions.

Some shops have also begun selling physical ‘bitcoins’, which are minted but do not hold any particular value in the slug.

They come with a code for one bitcoin embedded in the physical coin that can be redeemed in a digital wallet.

Is it safe?

Photo Bitcoin welcome: The currency is being accepted in shops and online.

The bitcoin market has undergone a series of dramatic booms and busts. It is anything but stable.

At the commence of two thousand eleven it was worth about thirty US cents and by the begin of two thousand thirteen it was worth $US13.50.

In February it was trading for a high of $US32, then in March it hit $92, and in April $215, before pulling down in the space of a week back down to $US65.

After a rocky few months it climbed from $US212 on November one to $US960 by November 27.

This should indicate that the currency is presently in a bubble.

The exchange price proceeds to fluctuate frantically day to day, sometimes by hundreds of dollars.

Early adopters who mined thousands of bitcoins rather quickly and cheaply stand to make hundreds of thousands of dollars, even millions, but for everyone else it will be a tighter proposition to buy into.

Bitcoins have also been the concentrate of hacking attacks.

A common tactic is for a hacking group to run a denial of service attack against a popular bitcoin exchange, thus bringing down the website temporarily.

Bitcoin owners sell their coins at other exchanges in the fright, which brings down the price, and the hackers and opportunists hop in and buy them before the price stabilises and the attacked exchange comes back online.

Hackers and scammers have also successfully managed to rob bitcoin mining pools.

The bitcoins were possessed by users that had joined TradeFortress’s mining pool.

While TradeFortress denies it was an inwards job, there have been some cases of mining pools being set up to generate bitcoins with the help of other users only for the pool to vanish with all their shares of coins.

Thefts are made all the more worse as there is no way to switch sides a bitcoin transaction and tracing a transaction is unlikely.

Photo The world’s very first bitcoin ATM opened up in Vancouver, Canada, in October 2013.

The US Congress has began holding a series of hearings to discuss the implications of virtual currencies like bitcoin.

While the US government says there is nothing illegal about virtual currencies, the anonymous nature of them make them popular for purchasing illegal goods.

This year the FBI shut down Silk Road – an online black market selling drugs and other illegal products that accepted bitcoins as a payment.

Other black markets on the dark web that sell things such as firearms and child manhandle material also accept bitcoins.

But the digital currency is not just for the shady parts of the internet, it is gaining acceptance from mainstream websites and even real world businesses.

Richard Branson has also begun accepting bitcoin payments for seats on upcoming flights into space on Cherry Galactic.

But despite growing in acceptance, the currency value is unstable and like with all financial matters people will need to do their own research before determining whether to invest the time and money.

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