Wednesday, February 26, 2014

Bitcoin: What Is It and How Does It Work

There are approximately 12 million bitcoins in circulation with new bitcoins added to circulation every day. By the year 2114 there will be 21 million bitcoins in existance. Then the digital bitcoin mint will be shut down for ever, and we will have to survive on these 21 million bitcoins.  No amount of pretty girls or declarations of war can change this because this is part of the Bitcoin protocol. 21 million. That's the number they went with.  Not 42, (which we all know is the answer to life, the universe, and everything), but 21.

They, (and by "they" I mean, those who write thick books in small print) say this protocol will guard Bitcoin against inflation. But inflation isn't the only ogre that is hiding under the monetary bridge. Bitcoin is a digital currency based on the internet and computers and servers and laptops and USB drives and so forth. So naturally, the Bitcoin creators had to make sure they were guarding against the number one digital threat, 31337 H4X0Rs, or Elite Hackers. So how do they keep hackers from getting into their Bitcoin program? Easy, you hide your program in the Internet.  That's right. IN the Internet. Somewhere in the Internet, hidden behind a period on a humble blog post or sneaking around someone's Facebook page, is the one and only Bitcoin. "How do you hide an entire program on the Internet?" you may be asking. Technically, It's actually just one long chain of letters and numbers and symbols that when put together make up the phenomenon known as Bitcoin.  This simple act of hiding this Bitcoin "block-chain" is actually the key behind "printing" or "mining" bitcoin. The art of bitcoin mining is a simple system based solely on finding this program that is purposefully floating around the internet like a smart Lego in outer space.

If you get out your Bitcoin approved telescope and find this Lego roaming around the Andromeda Galaxy of the Internet somewhere, and you go get it before anyone else does, you can take another Lego piece and add to the one that's already there. When this is done, you release one bitcoin into the digital world. Apparently, this is happening at least 25 times every ten minutes, but the bigger our block-chain or Lego creation gets, the less you will be able to add to it. This is also part of the Bitcoin protocol. So what happens when one of these hackers tries to "Select All" and "CTRL C" this block-chain of ones and zeros and throw another identical Lego piece out there? Good question.

The answer is, they can't. Something about... blah blah blah blah... they just can't okay...
All that Bitcoin has to do is stay ahead of the hackers for 100 years. Then when all the bitcoin currency has been released into circulation the giant Bitcoin Lego behemoth will self destruct, and all hacking attempts will be thwarted. Inflation will not exist and the world will be saved, the unicorns can finally come back, and the dolphins won't have to say, "So long! And thanks for all the fish."

One hundred years. That's a long time.  You can bet people will try to crack the code and ruin Bitcoin, but the cool thing is, most hackers and computer geeks want this thing to succeed. They want a currency they can depend on. Dollars and cents aren't cutting it anymore. If you haven't noticed pocket's don't jingle with change anymore. Wallets engorge themselves with plastic cards that have little magnetic strips on them. People are slowly moving away from physical cash. Most of our transactions occur through computers now, anyway. It seems everyday we move closer and closer to a cashless society. So I ask, why not Bitcoin? It's safer than what we have. It's not controlled by one country or one large bank or the price of gold. It's controlled by you and me. People on their computers, peer-to-peer (P2P). Whether it ends up working or not, I think the idea is pretty incredible.

Bitcoin is getting stronger and the almighty dollar is weaker than it's been in a long time. A dollar bill is just a sophisticated piece of paper now and it doesn't even have gold to back it up anymore. It calls itself a "note." We pass notes in class, that said, "Do you like me? yes, no, or maybe." I pass my "note" to the cashier and she looks at it and checks "yes." Then puts it in her drawer, and I walk out with a bunch of merchandise. What happens when the cashiers start looking at our notes and checking "maybe"?

The news is telling us Bitcoin is the next big thing. Many retail companies are accepting it as a currency now, and it's traded in over 200 countries and can even be exchanged at currency exchanges in airports and banks. It's slowly gaining momentum around the world. As I'm writing this 1 bitcoin (BTC) is worth $561.00 (USD), and if you click here, this link will tell you what it is worth right now, however it doesn't cost anything to set up a Bitcoin Wallet.

I set my Bitcoin wallet up through It's empty right now, but not for long. Soon I will be going in search of the Giant Lego in the sky hoping to mine a bitcoin or two. Not because I need it or even want it, but because I'm kind of a nerd and the whole concept fascinates me. I've included a link on the top of my blog page that, if any of you find yourself swimming in a vault full of bitcoins like Scrooge McDuck and you would like to contribute to my cause, you may click on and donate bitcoins to my wallet.

My money is not on Bitcoin just yet. I've done some research and am playing with it like a cheap toy. If it succeeds, great. A currency to beat all currencies. We could use a little hope in the financial world these days. But if it's not successful, someone will come along and develop something stronger and safer, and we will see if that catches on and becomes the next big thing. In the meantime, I will watch the worlds currencies, bend a sway with the times and the peoples, and enjoy earning, paying, giving and protecting what's mine. 


“He felt that his whole life was some kind of dream and he sometimes wondered whose it was and whether they were enjoying it.”
― Douglas Adams, The Hitchhiker's Guide to the Galaxy