Bitcoin: What it is, What it's Worth, and What's in its Future | Fanboys Anonymous

Bitcoin: What it is, What it's Worth, and What's in its Future

Posted by SirenaFeniks Monday, December 16, 2013
So, what's all the fuss about Bitcoin these days? Well, to put it into layman's terms, Robert McNally—an iOS developer at parking payment startup QuickPay—explains that Bitcoin is a type of money, or "unit of account," used to make transactions online.

Programmer Robert McNally Put Together An Awesome Presentation On What Bitcoin Really Is.
Bitcoins were first developed in 2009 by a Japanese person using the pseudonym Satoshi Nakamoto. Bitcoins are considered to be digital currency that are an "open-source peer-to-peer payment network." In order for transactions to be done, bitcoins need to pass through certain cryptography. For this reason, they are also known to be cryptocurrency ( Wikipedia).

The production of bitcoins occurs through a process called "bitcoin mining." Mining bitcoins does not necessarily require any knowledge of computer languages, because there are several websites available that provide guides on how to mine them.

Bitcoin from Wikimedia.
For example, one website, Start Bitcoin, provides a step-by-step "Beginner's Guide to Mining Bitcoins." After obtaining a bitcoin wallet, the user is given information about bitcoins as well as a walk-through of how to obtain and use them. Another website, Bitcoin, also explains in more detail how to begin using bitcoins.

Thus almost anyone with connection to the Internet can begin using bitcoins and even mining some! (Don't confuse this with Minecraft!) The process of mining can be complex for those not experienced in the field of computer hardware, but the websites mentioned above will at least introduce you to the process of mining.

There are approximately five types of machines used to mine bitcoins. Below are some images from Wikipedia:

Avalon ASIC-based mining machine GPU-based mining rig Butterfly Labs 65nm ASIC Single SC mining machine

ASICMINER USB mining device Lancelot FPGA-based mining board

Without going into more technical detail, the final question to ask is: how much is a bitcoin? Well, this is quite difficult to say, because bitcoins do not have a specific exchange rate. Because they are an open-source currency, they are not managed by a government and this makes them unaffected by inflation rates and whatnot. (Which is one of their primary advantages!) Thanks to some websites that offer currency conversion, however, calculating the currency values of bitcoins is becoming easier.

There are several sources that provide conversions of bitcoins. The three I found to be reliable were the following. The first source Preev claims that—as of December 12, 2013—one bitcoin (BTC) was equal to $863.40 USD, which is changing even as this is being written. The second source, XE, states that one bitcoin (XBT) was equal to $870.766 USD. This site also declares that:
Our currency rankings show that the most popular Bitcoin exchange rate is the USD to XBT rate. There is no official ISO currency code or Bitcoins, although XBT is commonly used. The currency symbol is XBT.
The third and final source (which I found to be the most reliable) is MTGOX. This site provides all of the changing values of the bitcoin as per each currency. On December 12, 2013, MTGOX shows that the lowest value for one Bitcoin (BTC) was equal to $856.12 USD, whereas the highest value was $912.25 USD.

After its first development in 2009, Bitcoins have experienced several highs and lows. According to McNally, the number of bitcoins more than tripled within the past three years. When they came out in 2010, the number of coins was 3 million, and by 2013, the number of coins reached a startling 10.5 million!

Number of Bitcoins over time line graph chart
Based on McNally's linear graph, "Number of Bitcoins Over Time" (shown on the right), the number of Bitcoins is expected to double by the year 2025 (about 12 years from now). This linear graph is actually based on the number of gold stocks throughout the millenia, but the same pattern is applicable to Bitcoins.

In summary, speaking as of today, the rocky situation of Bitcoins has been finalized by the Chinese. Right now, China has stopped the transaction of Bitcoins in some businesses. Seth Fiegerman of mashable.com announced in his article "Bitcoin Prices Plunge After China Cracks Down on Currency" that:

The price of bitcoin surged to $1,000 last month, but it dipped far below that mark just as quickly. Baidu, China's largest search engine, announced this week that it would no longer accept the digital currency as a form of payment, triggering a steep drop in the price of bitcoin. The announcement, which was posted on the Baidu website, followed a decision from China's central bank to prohibit financial institutions in the country from processing or insuring bitcoin transactions.
From these facts we can conclude that the situation with Bitcoin is a bit shaky. When it seems that it may not be doing so well right now, at some point, the situation of Bitcoin might become more positive. It's hard to say whether the situation of Bitcoins will be able to return to its previous condition after a big market such as China has made it stumble. So be aware when you mine your Bitcoins!
THIS POST WAS WRITTEN BY A GUEST WRITER

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