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What Is Bitcoin?
How this digital currency works and why it's so controversial
by Paul Gil
Updated on March 09, 2020
Cryptocurrency
What Are Bitcoins?
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Bitcoin is a virtual currency that gained recognition after its price-per-coin rose above $13,000 in early 2018. The cryptocurrency (one of many) is at the center of a complex intersection of privacy, banking regulations, and technological innovation. Today, some retailers accept bitcoin, while in other jurisdictions, bitcoin is illegal.


Cryptocurrency Defined
Cryptocurrencies are lines of computer code that hold monetary value. These lines of code are created by electricity and high-performance computers.

Cryptocurrency is also known as digital currency. It's a form of digital money created by mathematical computations and policed by millions of computers (called miners) on the same network. Physically, there's nothing to hold, although crypto can be exchanged for cash.

An illustration of how cryptocurrency works
Lifewire / Vin Ganapathy
Crypto comes from the word cryptography, which is the process used to protect the transactions that send the lines of code for purchases. Cryptography also controls the creation of new coins. Hundreds of coin types now dot the crypto markets, but only a handful have the potential to become a viable investment.


Governments have no control over the creation of cryptocurrencies, which is what initially made them so popular. Most cryptocurrencies begin with a market cap in mind, which means that their production decreases over time. This is similar to the physical monetary production of coins; production ends at a certain point and the coins become more valuable in the future.

What Are Bitcoins?
Bitcoin was the first popular cryptocurrency. No one knows who created it — most cryptocurrencies are designed for maximum anonymity — but bitcoins first appeared in 2009 from a developer reportedly named Satoshi Nakamoto. He has since disappeared and left behind a bitcoin fortune.


Because bitcoin was the first major cryptocurrency, all digital currencies created since then are called altcoins, or alternative coins. Litecoin, Peercoin, Feathercoin, Ethereum, and hundreds of other coins are all altcoins because they are not bitcoin.

One of the advantages of bitcoin is that it can be stored offline on local hardware, such as a secure hard drive. This process is called cold storage, and it protects the currency from being stolen by others. When the currency is stored on the internet somewhere, which is referred to as hot storage, there is a risk of it being stolen.


On the flip side, if a person loses access to the hardware that contains the bitcoins, the currency is gone forever. It's estimated that as much as $30 billion in bitcoins has been lost or misplaced by miners and investors.

Why Bitcoin Is so Controversial
Various events turned bitcoin into a media sensation.

From 2011 to 2013, criminal traders made bitcoins famous by buying them in batches of millions of dollars so they could move money outside of the eyes of law enforcement and tax collectors. Subsequently, the value of bitcoins skyrocketed.

Illegal financial transaction
krisanapong detraphiphat / Getty Images
Scams, too, are very real in the cryptocurrency world. Naive and savvy investors alike can lose hundreds or thousands of dollars to scams.


Bitcoins and altcoins are controversial because they take the power of issuing money away from central banks and give it to the general public. Bitcoin accounts cannot be frozen or examined by tax inspectors, and middleman banks are unnecessary for bitcoins to move. Law enforcement officials and bankers see bitcoins as similar to gold nuggets in the wild west — beyond the control of police and financial institutions.



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Cryptocurrencies and fiat currencies are similar because both were created as a medium of exchange. However, that’s where the similarity ends. With cryptocurrencies, third parties are not involved. With fiat currencies, you have banks, money lenders, governments, and so on. And cryptocurrencies have cryptographic functions to ensure that the transactions are kept secure. Bitcoin, for example, uses the SHA-256 algorithm to ensure security.кошельки ethereum кости bitcoin locate bitcoin Monero was developed with four core principles:перспективы bitcoin

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Each form of stress hardens the bitcoin network and often for different reasons. Whenever governments take action in an attempt to ban bitcoin or otherwise restrict its use, the network continues to function unperturbed. China and India, countries with a combined population of 2.7 billion people, have both taken material actions to curb the spread of bitcoin. Despite this, the network as a whole continues to function without flaw, and bitcoin continues to be used in both countries. After the RBI (Central Bank of India) restricted the ability for banks to service bitcoin or cryptocurrency-related companies, the Supreme Court in India ultimately overturned the ban as unconstitutional. It sets precedent in more ways than one. First, that the central bank was overruled; second, that the ban was ultimately unsuccessful as people continued to find ways to access bitcoin; and third, that despite these actions, the network was unphased. Separately, China has taken measures to restrict the ability of exchanges to facilitate bitcoin trading and has expressed an interest in eliminating bitcoin mining. Similar to India, people continue to use bitcoin in China and the bitcoin network has been undeterred. Naturally, as government regulation in China has become more restrictive, miners have begun to look to more stable jurisdictions. Bitcoin mining in the United States (among other regions) continues to grow, and Peter Thiel recently backed a startup that is building out mining operations in West Texas. Regardless of the threat, bitcoin exists beyond countries (and governments). The network adapts to jurisdictional risks and continues to function without interruption. As network participants observe the failed attempts to inhibit bitcoin’s growth and witness how it adapts, bitcoin does not merely remain static; it actually becomes more resilient through this process by routing around and immunizing each passing threat.mooning bitcoin падение bitcoin bitcoin wmz wallpaper bitcoin

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For hundreds of years, gold has dominated the safe-haven asset arena, while bitcoin was launched just over a decade ago and has only achieved widespread recognition in the last few years. Below, we'll compare these two investment options head-to-head:The South African Revenue Service, the legislation of Canada, the Ministry of Finance of the Czech Republic and several others classify bitcoin as an intangible asset.заработка bitcoin 20 bitcoin банк bitcoin отзывы ethereum cryptonator ethereum ethereum видеокарты bitcoin курс ethereum com обмена bitcoin monero пулы ethereum contracts bitcoin song bitcoin info bitcoin puzzle bitcoin аккаунт bitcoin 2020 monero pools bitcoin hack agario bitcoin bitcoin шахта

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