Bitcoins have hit the big time, with one unit of the virtual currency now worth $100.
Analysts describe the currency’s meteoric rise as a bubble, but enthusiasts are look to the day when mainstream merchants accept bitcoins as tender. It’s currently accepted online by a growing group of techies, but most of us are still uncertain about its true value and wouldn’t know what to do if we got our virtual hands on a pile of them.
Continuing financial uncertainty around the globe has aided bitcoin’s recent skyrocketing rise in price, according to ConvergEx group chief market strategist Nick Colas.
How does one get a bitcoin? They’re released in batches from a central computer network:
In many ways, bitcoins function essentially like any other currency, and are accepted as payment by a growing number of merchants, both online and in the real world. But they are generated at a predetermined rate by an open-source computer program, which was set in motion in January of 2009. This program produced each one of the nearly 11 million bitcoins in circulation (with a total value just over $1 billion at the current rate of exchange), and it runs on a massive peer-to-peer network of some 20,000 independent nodes, which are generally very powerful (and expensive) G.P.U. or ASIC computer systems optimized to compete for new bitcoins. (Standards vary, but there seems to be a consensus forming around Bitcoin, capitalized, for the system, the software, and the network it runs on, and bitcoin, lowercase, for the currency itself.)
Bitcoin releases a 25-coin reward to the first node in the network that succeeds in solving a difficult mathematical problem requiring a certain amount of brute-force computation (known as a proof-of-work calculation). The solution is then broadcast throughout the network, and competition for a new block and its 25-coin reward begins. (There’s a good rundown of the technical aspects of Bitcoin on the Bitcoin wiki; there’s also a wonderfully pellucid explanation of the proof-of-work angle from Paul Bohm on Quora.)
So turn on your computer and get cracking: There’s bitcoins to be mined!Like This Post