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Bitcoin

What is it, and how does it work?
by

Zia Bedi

on 11 January 2015

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Transcript of Bitcoin

The End!
How Does It Work?
Mining
Value
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
AP Macroeconomics
Monday, November 3, 2014
Zia Bedi
What Is Bitcoin?
Legality
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
Bitcoin
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
mining rig
USB mine
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
http://www.coindesk.com/price/
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
payment freedom
low fees
fewer risks
security
transparent and neutral
degree of acceptance
volatility
ongoing development
illegal activity
Advantages
Disadvantages
Works Cited
"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/>.
Full transcript