Technology: Bitcoin

Last week, I started delving more and more into random internet things. The most interesting - and, arguably, useful - things I found was Bitcoin.

For a quick introduction, watch this short video.

Essentially, Bitcoin is a distributed, secure, P2P currency. It is protected by some highly developed digital cryptography, and is about as structured and secure as normal currency. When you use it, you are given a digital wallet, and are able to generate payment addresses that are long, unique, and allow instant, anonymous payment from one individual to another, with no way of tracing or undoing the payment.

One important question remains, at least on the theoretical end: how is Bitcoin issued? Most currency is issued by a government, or by some other entity. Bitcoin itself has no such controlling entity and, in fact, is completely dissociated from any central authority - one of its most appealing and intriguing aspects, in my opinion.

Anyways. The issuance of Bitcoin comes from a concept known as Bitcoin mining. Essentially, Bitcoin mining is a computationally difficult problem in which you add the logs of Bitcoing transactions to the overall logs. This is made difficult by the use of difficult to compute hash tables.

So, in a non-technical fashion, Bitcoins come into existence when other people allow you to move your Bitcoins around.

In addition, the reward for mining goes down over time, and the difficulty goes up over time. Within the next few weeks, for instance the reward will be dropping from 50 BTC per block to 25 BTC per block. As the difficulty goes up and the reward goes down, the number of BTC issued continues to drop, with an eventual hard cap of about 21 million BTC, IIRC.

(At this point, the only reward for mining will be transaction fees, which are attached to many different types of transactions. The hope is that those transaction fees will start adding up after Bitcoin matures more, ensuring that mining remains an overall attractive option.)

So, what do you use Bitcoin for? Well, you buy stuff with it, or you trade it, or whatever else. If you go to the Bitcoin Wiki, you can easily find the trade page for Bitcoins, which is a list of different services you can trade for - over the Internet, of course - in exchange for Bitcoins; the variety is somewhat astounding, and some of the offered services are incredibly skill and/or talent intensive.

You can also buy tangible goods with Bitcoins. There are bars in Germany that sell drinks in exchange for Bitcoins. Perhaps more relevantly, you can exchange Bitcoins for gift cards for major online retailers, such as Amazon.

To get started with Bitcoin, you basically just have to download a wallet and look around. There are many opportunities to get small numbers of Bitcoins for free just by browsing around the Internet, and you can always offer up your part-time services in exchange for Bitcoins.

(It is important to keep in mind that, currently, one BTC is worth about ten dollars, and it is fairly easy to exchange them for goods, cash, or gift certificates in close to that amount - sometimes less, sometimes more.)

To put it all in short - Bitcoins are cool, useful, valuable, and fairly easy to get into. You probably don't want to try mining unless you're super hardcore with your computing, but there are other ways to get a hold of Bitcoins.

And now I'm done. As per usual, put any comments, insults, or other vaguely related statements in the comments section below, and I hope you enjoyed the read.