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What is a Bitcoin?
Bitcoins are not a fiat currency and have been described as digital gold. They are a scarce virtual commodity whose supply will never exceed 21 million coins. Their rate of release into the marketplace is predetermined with all of the bitcoins being “mined” by the year 2140. The miners are rewarded bitcoins by working on a complex puzzle which is essentially a giant ledger of all bitcoin transactions to ensure that no coins are double spent. Miners randomly receive bitcoins proportional to the amount of computing power they devote to the network. No matter how many people mine the rate of bitcoin creation remains predetermined as the difficulty of finding bitcoins adjusts to the total network computing power.
Like gold, bitcoins are scarce, divisible, fungible, portable, and durable. They have all of the characteristics of money and may very well be the most important invention since the internet. In a world where a group of people can devalue a currency; I welcome the arrival of Bitcoin. I suspect many others will follow and believe they are worth the risk of owning.
I and many people are thankful for this new peer to peer exchange by beginning to decentralize our commerce tool. This is the very same tool Jesus went into the Temple and showed real emotion and threw the money changers from the temple some even state it could be the Next Cyber Christ to save us from the last 2000 years of Greed in which someone wants to control something that should be decentralized and owned by everybody. It is the reason, the very cause of all that has been made impure by certain peoples need for greed. This will finally allow all of us to see that their is enough is this world for Everyone but not enough for a bunch of ass hats greed.
One of the core challenges of designing a digital currency involves something called the double-spending problem. If a digital dollar is just information, free from the corporeal strictures of paper and metal, what’s to prevent people from copying and pasting it as easily as a chunk of text, “spending” it as many times as they want? The conventional answer involved using a central clearinghouse to keep a real-time ledger of all transactions ensuring that, if someone spends his last digital dollar, he can’t then spend it again. The ledger prevents fraud, but it also requires a trusted third party to administer it.
Bitcoin did away with the third party by publicly distributing the ledger, what Nakamoto called the “block chain.” Users willing to devote CPU power to running a special piece of software would be called miners and would form a network to maintain the block chain collectively. In the process, they would also generate new currency. Transactions would be broadcast to the network, and computers running the software would compete to solve irreversible cryptographic puzzles that contain data from several transactions. The first miner to solve each puzzle would be awarded 50 new bitcoins, and the associated block of transactions would be added to the chain. The difficulty of each puzzle would increase as the number of miners increased, which would keep production to one block of transactions roughly every 10 minutes. In addition, the size of each block bounty would halve every 210,000 blocks first from 50 bitcoins to 25, then from 25 to 12.5, and so on. Around the year 2140, the currency would reach its preordained limit of 21 million bitcoins.
When Nakamoto’s paper came out in 2008, trust in the ability of governments and banks to manage the economy and the money supply was at its nadir. The US government was throwing dollars at Wall Street and the Detroit car companies. The Federal Reserve was introducing “quantitative easing,” essentially printing money in order to stimulate the economy. The price of gold was rising. Bitcoin required no faith in the politicians or financiers who had wrecked the economy just in Nakamoto’s elegant algorithms. Not only did bitcoins public ledger seem to protect against fraud, but the predetermined release of the digital currency kept the bitcoin money supply growing at a predictable rate, immune to printing-press-happy central bankers and Weimar.
Nakamoto himself mined the first 50 bitcoins which came to be called the genesis block—on January 3, 2009.
This is Our Governmental Logic at it’s worst.
If it moves regulate it, if it keeps moving tax it, and if it stops moving subsidize it.