As promised, here is a short article on crypto currency. So
as explained before, currency should have no value. Bitcoin (it's shorter than
crypto currency to type) comes to new levels of worthlessness by being data.
So to explain it all, here is a helpful analogy.
If we let bitcoins be gold and the earth be a lot of calculations
that need to be done. Like the earth and it's small pockets of gold, some of
the calculations are bitcoins. Also like the earth and its finite amount of
gold, there are a finite number of bitcoins that can exist, that number being
21 million.
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| In case you didn't read the last sentence |
So now we know that there's gold beneath the earth, how do
we get to it? We mine it of course. Anything that does calculations trying to
find bitcoins is pretty much stabbing around in the dark, with a calculation
being a bit of ground dug up, the more powerful the computer, the faster it
mines, so a phone might be the equivalent of a worm digging, and a Butterfly Labs
ASIC Miner being a large digger. Hence there is a chance that a worm might
stumble across a bitcoin, but it is far, far more likely that the digger will
get there first. But what if we were to get a lot of people who all own mining
equipment to dig at once and split the profit based on how much they
contribute. What a great idea, as then the group as a whole has a very large
chance of finding something and everyone gets something, compared to the all or
nothing outcome of a lone miner. Hence mining pools are now the easiest way to
get into coin mining.
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| A mining pool |
So that's the basics of what bitcoin is. We could go into more
depth on wallets and storage of coins, the anonymity of transactions among
other things, but that's beyond the scope of this short article. In general
though, if it sounds like something that would make sense if you were digging
for gold, then it probably applies to bitcoin, (for instance new gold being
harder to find once a lot has already been dug up).