Bitcoin and all cryptocurrencies are forms
of digital currency, using cryptography (the art of writing or solving codes)
to secure and settle transactions on the internet in conjunction to a linked chain
using the block chain technology. The block chain systems to support the use of
crypto currencies is not subject
to any government backed security or regulation.
Crypto currencies are held in so
called virtual wallets and the largest of these is Bitcoin. Subsequently
one can use the coins to settle transactions just as you would for traditional
cards issued by financial institutions. But the difference is that settlement
is provided by the use of the block chain technology. That technology guarantees the
fidelity and security of a record of data without the need for a trusted third
party such as a bank or financial institution.
How the Block chain technology works in relation to supporting the use of crypto currencies such as bitcoin is that the owners of the technology develop a secret code. One the code is cracked it provides the instructions for all of the transaction in a designated block to be settled simultaneously on the internet. As each block is settled it is linked in the chain that continues on with each new block of transactions.
Anyone can attempt to crack the code and those engaged in attempting to crack the code are called miners. Once the first miner cracks the code, access is then gained to the secured technology for all the transactions to be simultaneously settled within that block.
The Miners get paid in new issues of cryptocurrencies such as bitcoin.
You need very powerful computers to crack the codes. Anyone can
become a miner but you need huge amounts of computer power to be the first to
crack the codes.
So long as the value of the bitcoin exceeds the miners cost to crack the code the value is sustainable, but can be skewed by speculators just as can be the case for any currency.
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