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Bitcoin

Bitcoin is the first decentralized cryptocurrency, first implemented by the mysterious person Satoshi Nakamoto in 2009. Bitcoins can be saved on a personal computer in the form of a digital “wallet” file or being stored by a third party. In both cases the cryptocurrency can be transferred to other bitcoin address through the internet.

This form of “digital cash” uses a database spread over many nodes in a peer-to-peer (p2p) network. It uses cryptography for security, and makes sure the sender is the legitimate owner and that currency cannot be double spent.

Because of the decentralized peer-to-peer design of bitcoin it is nearly impossible for governments or other parties to create more of the currency and cause more inflation than planned. In contrast to fiat currency, the inflation is set to fixed points. It is already known that Bitcoins used for criminal transactions are relatively easily traceable. Using Bitcoin for money laundering is a lot more difficult than previously thought. Every transaction is saved in the so called “blockchain” and is publicly accessible. Even though bitcoin addresses are not as transparent as credit card data, it is less anonymous than using cash money.

Mining Bitcoin

A Bitcoin can be virtually “mined”. Every day a certain amount of Bitcoin is released to people who mine Bitcoin actively. This can be done by utilizing computer processing power. Many groups are formed who are working together in “mining pools”.

Storing Bitcoin

There are many ways to store Bitcoins. As mentioned before, Bitcoin can be stored in a wallet file on your personal computer. It is also possible to create a “paper wallet”, is essentially is a piece of paper with a public address and a private address. The public address can be shared with other parties to receive funds. The private address, as the name suggests, should not be shared, and can subsequently be used to to access your funds. Alternatives for storing Bitcoins are web wallets, exchanges and hardware wallets. Hardware wallets, such as Trezor, store your public and private key on a separate device, which you can connect to your personal computer to transfer funds. Read more on the Inside Bitcoin Tel Aviv event.

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