Bitcoin Digital Currency
What is Bitcoin?
Bitcoin is an alternative digital currency that uses cryptography (techniques for secure communications) to keep it secure, and for this reason it is called a cryptocurrency. It uses a peer-to-peer (P2P) network to transact instant payments, and is not backed by any banking institution, central authority, government or hard assets. If a vendor accepts payment in Bitcoins, they can be used just like currency.
Bitcoins are held in Bitcoin addresses and are stored in a program called a digital wallet. A Bitcoin address has two parts: the public key (called the address), and the private key. The private key allows you to spend Bitcoins, and should be kept secret, just as you would with an important password and user name. The public key allows you to receive Bitcoins and can be shared, because the public key address can be calculated from the private key, but the private key cannot be calculated from the public key.
What is Bitcoin mining?
Bitcoins are created by a process called “mining” that involves complex mathematical calculations performed by computers, which are used to confirm transactions securely. Bitcoin miners are rewarded with transaction fees for their services and newly created Bitcoins. The Bitcoin network will mathematically generate only 21 million Bitcoins ever, and this will insure that they will not become devalued over time. It is calculated that the last Bitcoin will be mined in 2140.
How are Bitcoins denominated?
Bitcoins are currently divisible up to 8 decimal places, although more can be added with increased value. Currently the smallest denomination is called the “Satoshi” and is named in honour of Satoshi Nakamoto, the pseudonym of the person who published the proof of concept in 2009.
Below are the accepted international denomination prefixes:
- 1 BTC = 1 bitcoin
- 0.01 BTC = 1 cBTC = 1 centibitcoin or bitcent
- 0.001 BTC = 1 mBTC = 1 millibitcoin or mbit or millibit or bitmill
- 0.000 001 BTC = 1 μBTC = 1 microbitcoin ubit or microbit
- 0.000 000 01 BTC = 1 satoshi