Essay about The Crypto Currency: Bitcoin

1474 Words 6 Pages
The Crypto Currency: Bitcoin
Prelude
There are lots of ways to make money: You can earn it, find it, or counterfeit it. Or, if you are Satoshi Nakamoto, you can create it. In November 2008, a mysterious entity going with the persona "Satoshi Nakamoto" published a research paper outlining his design for a new digital currency that he called bitcoin. None of the veterans had heard of him, and what little information could be gleaned was murky and contradictory. On his online profile, he said he is from Japan. His email address was from a German service, and Google searches for his name turned up no relevant information; it was clearly a pseudonym. But while Nakamoto himself may have been a puzzle, his creation cracked a problem that had
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Bitcoin’s economy consists of a network of its users’ computers. Every ten minutes, an algorithm releases 50 new bitcoins into the network, with the pace halving in increments until around 2140. The supplies of bitcoins grow automatically where it is asymptomatically approaching 21 million, and the demand is driven by the volume of bitcoin-denominated transactions. This ensures regular growth of the monetary supply without interference from third parties. To prevent fraud, the bitcoin software maintains a pseudonymous public ledger of every transaction. Individual bitcoin users generate new coins out of thin air through a process known as mining, by using their computing power to solve a cryptographic puzzle. The first client to find the solution announces the result to the whole network and earns a little reward for itself in the form of bitcoins. By finding the newest solution to the proof-of-work problem, a bitcoin client confirms the history of previous transactions. Future coins cannot be mined in advance because the computation relies on the chain of previous blocks and the history of transactions since the most recent block.
The Rise and Fall of the Crypto Currency
Through 2009 and early 2010, bitcoins had no value at all, where the value of one bitcoin stayed below 14 cents. Then, as the currency gained viral traction, the rising demand for a limited

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