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Transcript of Bitcoin
How Does It Work?
competitive, decentralized process
individuals process transactions and secure the network using specialized hardware
collect new bitcoins in exchange for service
backed by mathematics, not physical properties or trust in central authorities
value comes from the trust and adoption of those willing to accept it as payment
price determined by laws of supply and demand
small size of market makes the price volatile
Monday, November 3, 2014
What Is Bitcoin?
decentralized electronic currency
not controlled by a single organization or government
no banks, no middlemen
community run system
bitcoin does not have legal tender status
however, that does not mean it is illegal
point of interest for many government agencies
concerns about regulation and taxation
Advantages and Disadvantages
users have a bitcoin wallet on their phones as a mobile app or on their computers as a computer program
with a simple click of a button, bitcoins are exchanged for goods and services
transactions are processed by other users in a service known as mining
software listens for transactions and performs complex calculations
transactions are confirmed by being included in a block with a mathematical proof of work
takes about 10 minutes to find a block
every new block builds upon the previous block, so miners can't cheat or process fraudulent transactions because a block of invalid data would be rejected
6 confirmations, or 6 new blocks built after the one containing your transaction is considered safe
The Mining Process
Mining and New Bitcoins
new bitcoins are created as a result of mining
created at a decreasing, predictable rate
each year, the number created is halved
bitcoin issuance will halt completely when the amount in circulation reaches 21 million
Financial Crimes Enforcement Network (FinCEN)
bitcoin users are safe from regulation
creating or acquiring bitcoins to exchange for goods and services
bitcoin miners may be subject to regulation
creating or acquiring bitcoins to sell for real currency
Internal Revenue Service (IRS)
individuals/businesses will have to report bitcoin sales as taxable income
taxed as property, not currency
transparent and neutral
degree of acceptance
"Bitcoin News, Prices, Charts, Guides & Analysis - CoinDesk." CoinDesk RSS. CoinDesk, 2014. Web. 27 Oct. 2014. <http://www.coindesk.com/>.
"Frequently Asked Questions." FAQ. Bitcoin Project, 2009. Web. 27 Oct. 2014. <https://bitcoin.org/en/faq#is-bitcoin-legal>.
"What Is Bitcoin ?" Bitcoin.com: Current Bitcoin Value & New User Information. Blockchain, 2014. Web. 27 Oct. 2014. <http://bitcoin.com/#bitcoin_value>.
Yellin, Tal, Dominic Aratari, and Jose Paglieri. "What Is Bitcoin?" CNNMoney. Cable News Network, n.d. Web. 27 Oct. 2014. <http://money.cnn.com/infographic/technology/what-is-bitcoin/>.