Litecoin QT mining pool

Crypto currency or more specifically Bitcoin, is a new type of currency that is making waves around the world, but few understand what it is and how it works. So what is Bitcoin? Bitcoin is a digital decentralized currency that is free of any central authority and is completely anonymous. Each person has a digital wallet with a randomly generated address. Payments are made to and from these addresses.

When a payment is made it is broadcasted throughout the network, and the destination receives the payment almost immediately. All payments are recorded in what is called a block chain. The block chain is a central location that contains all transactions ever made and is accessible by everyone. This means that all transactions are public, however the sender and receiver are not known.

Bitcoin is becoming popular among online retailers by accepting bitcoin as payment for goods and services, much like Paypal.

Bitcoin has had a turbulent past after soaring to over $1, 000 per bitcoin. China has banned Bitcoin altogether as a result of hacked exchanges and stolen bitcoins and potential links to criminal organizations due to the anonymity of the currency. As of today, the price of bitcoin sits at approximately $500 per bitcoin and there are signs that it may stabilize, at least for now.

The United States just recently announced that Bitcoin will be treated as property when reporting income. Here in Canada there are 2 Bitcoin ATMs located in Toronto and Vancouver. I have yet to visit the Toronto ATM, despite being only a few blocks from our office! The ATMs allow you to buy bitcoin using your Credit Card which is a fast and convenient service. When a payment is made there is a small transaction fee of 0.001 Bitcoin. This is to pay for the Bitcoin miners.

Since there is no physical property, what gives Bitcoin value? It has equity-like characteristics because its value seems to grow as the ecosystem grows. Having lots of people use it, it gains value.

Crypto currencies are created using computers or specialized hardware known as ASIC miners that calculate hash algorithms (complex formulas). Bitcoin and other crypto currencies have mechanisms built in to regulate how many coins are generated for a certain amount of time. If too many coins are being generated, then the level of difficulty increases to slow down miners. At the same time third party companies are building faster hardware and the difficulty keeps increasing.