This is part 1 in what will be a 3 part series, which will become progressively more in depth and technical.
The term Bitcoin has been in the news lately; Bitcoins have been
rising in value with volatility, but also mystery for someone without a
computer science or mathematical background. In this post I will cover
the vocabulary and basics of bitcoin and bitcoin transactions.
Wallets and Addresses manage bitcoin transactions.
The Block Chain is a public record of every transaction that has ever occurred.
Mining is a resource-intensive process that rewards successful miners newly “minted” bitcoin (the current reward is 25 BTC; that quantity will halve to 12.5 in 4 years)
Miners are those who mine bitcoin. In addition to adding new bitcoin to the network, miners are necessary to process transactions and maintain the Block Chain.
Pooled mining is when miners get together to cooperate so they can have a better chance to win new bitcoin and then share the reward.
I did not start mining because I saw it as a scheme to get rich. I know
that savvy investors, those with specialized mining hardware and hackers
who got involved when mining was still cheap and easy, like my buddy Mike Renz, have beat me to it.
I started mining because the term ‘decentralized pseudo-anonymous cryptocurrency’ is packed with buzzwords that resonate with extra clang to a recent mathematics graduate. Mining was a way to join and contribute to a network that I find fascinating, the way an economics nerd might invest on the side for fun.
A bitcoin is not tangible like a dollar, but I can still own a bitcoin; I can spend bitcoins because there are vendors that will accept bitcoins as payment and I can trade my bitcoins for Dollars, the same way that I can trade Euros for Dollars at a currency exchange.
Thankfully, I do not need to spend full bitcoins at a time - it’s not often that I buy goods or services between $500 and $900, which is what each bitcoin is currently trading at. In the same way a Dollar is divided into 100 cents, a bitcoin (1BTC) can be divided into decibitcoins (1 dBTC = 0.1 BTC), centibitcoins, millibitcoins, among other units. The smallest unit is called a “satoshi” (1 “satoshi” = 0.00000001 BTC), named after the pseudonym masking the group of mathematicians who created Bitcoin.