What is a Bitcoin?


Bitcoin Currency of the Future?

By Marshall Murphy

The crypto-currency Bitcoin has surged in popularity over the last few months, hitting

an all time high April 10, at $266.00 a coin. The new digital currency is forcing a world

online to rethink the way it moves money on it.

Developed by what could be a single person or group of people under the pseudonym

Satoshi Nakamoto, the first version of the open source software “Bitcoin-Qt” was

released to the public in 2009. Bitcoin-Qt is an application for the peer-to-peer currency

that connects to the Bitcoin network generating unique digital wallet keys for the

coins and a corresponding “QR code” for scanning. The decentralized currency makes

individuals their own bank who can make transactions around the world.

Bitcoin is a mathematical based currency secured cryptographically with well-known

cryptographic methods making the actual Bitcoin system’s vulnerability to hacking,

slim to none. All transactions are secured cryptographically through the process of

Bitcoin mining. Mining is done via a network of computers working to solve complex

cryptographic puzzles. This process is a safeguard to keep the network secure. A Bitcoin

miner is rewarded for investing the time and energy to verify a transaction with a certain

amount of Bitcoin. The mining model was made to reflect how much time it takes

to actually mine gold. Once a transaction has been made it is saved as a “block” into

the public ledger known as the Blockchain. One “block” is produced approximately

every 10 minutes. Mining keeps the whole Bitcoin sphere running smoothly by solving

cryptographic puzzles, which verify Bitcoin transactions and bring more of the currency

into existence. The inherent value of Bitcoin is the time, energy and security of its


Early versions of Bitcoin-Qt allowed mining just by pressing a button with any old CPU.

Today miners are using specialized A.S.I.C. (Application Specific Integrated Circuit)

chips for the extra computing power needed to get the job done.

There will only be slightly less than 21 million Bitcoins available. Today there are more

than 11 million Bitocin that have been mined into existence, with the last of the coins

said to be mined in 2140. After every 210,000 blocks mined and logged the reward is

cut in half. Today miners receive an award of 25 Bitcoin for every block of transactions

verified. The cryptographic methods used allow the Bitcoin software to determine

without a doubt, which addresses it went to. The miners insure no one can create Bitcoins

out of thin air.

Steven Kane a web developer in San Diego and a group organizer for a San Diego

Bitcoin meet up, found out about Bitcoin in 2010 in a chat room. He set himself up

a Bitcoin wallet and sent his address to the Bitcoin miner who had told him about it.

The guy in the chat gave him his first Bitcent (fraction of a Bitcoin) and he has been

interested ever since.

Kane made his first investment in Bitcoin after finding an opportunity in a forum.

“The guy was in Canada so what you would do was literally send him cash in the mail

and you would put your address on a piece of paper,” said Kane. “You could go to his

website, lock in the price and take a print out with the cash and mail it to the guy. That is

how I bought my first coins.”

Kane said he considered it a good investment because he saw not only the potential in

the technology but the growing community around the technology. So he decided to buy


“The first coins I bought were at $1.44 and that was the first stash of coins I bought.

Then I put about 500 bucks into that. Then Less then a year ago I bought my next batch

of coins for $9 [a coin] then I put about $9,500 into that so total I put about 10,000 into

Bitcoin,” said Kane. “You can do the math it was at 266 bucks recently. I actually sold 2/

3 of my stash at $220.00.”

Kane chose to sell off his coins after seeing 20-50 percent gains a Bitcoin and some

pestering from his family telling him to sell. He said although he is very bullish with

Bitcoin he knew the market would correct itself.

Kane said what he calls the legacy banking system we currently have is archaic with

things like processing times lasting days and wire transfers. He said while he did profit

from Bitcoin he still wants to help build the community.

“I can send an email to you and its there in a second why can’t we do that for money?” he

said. “Bitcoin is a reaction against the legacy banking system it is filling niches and voids

that the legacy banking system is not addressing, it is not providing what people need.

There is a legitimate need for cash like transactions on the internet.”

The peer to peer nature of the decentralized currency makes it appealing to those who

believe fiat (government based) currencies are becoming more unreliable.

“Before I knew of Bitcoin I had burned dollar bills on the steps of the Federal Reserve

at an ‘End the Fed March,’” said Stephen Gormick, Bitcoin enthusiast, and Blogger

at Bitcoinmoney.com. “When I learned about bitcoin I was like this is needed, this is

maybe, not the way to end the fed but it is a darn good step in that direction.”

Gormick saw the potential of the currency since he stumbled upon an article in 2010

while he was working on his own startup company.

“I came to the realization that Bitcoin was a lot bigger than the project I was

working on,” said Gormick. “So I abandoned my project I had been working on for

nearly a year and have been involved in Bitcoin ever since. I could see the potential

right off the bat.”

Gormick realizes the volatility of the young market but it is everywhere not just


“Gold just had a huge rise and drop and it is kind of the same thing, the cost for

physical gold didn’t have that volatility it was only the paper gold that had that level

of volatility.” said Gormick. “The volatility the peaks and the valleys they aren’t real,

because you can’t buy at the bottom and you cant sell at the top. The true price is

somewhere in the middle.”

Gormick sees Bitcoin growing and soon every business will have a Bitcoin

component. Many investing in the young and volatile Bitcoin market are venture

capitalists, startup companies and specular. Bitcoin also happens to make the

“perfect poker chip,” fostering many Bitcoin gambling dens online.

Andrew Root a web Developer with Druple.org and technologist recently started

looking into Bitcoin after the spike back in April due to banks closing in Cypress. He

said he was very interested in the psychology of the young market that fluctuates


“I believe in Bitcoin I think it will probably do well but I really believe in crypto-

currency, Bitcoin could go either way but I think crypto-currency probably is an

idea that is here to stay. It is really interesting to watch what Bitcoin does as a front

runner.” said Root, “If another coin systems supplants it eventually that would be

interesting, but there are a lot of lessons to be learned from this, even if it doesn’t

pan out, I believe it will facilitate the moving of money on the internet and allow

more Internet services.”

There are many more crypto-currencies popping up trying to carve out a market

and compete with Bitcoin. Litecoin, Namecoin and PPCoin just to name a few.

Mt. Gox the Bitcoin exchange based in Japan has been making most of the trading

possible to convert Bitcoin into all the major fiat currencies 80 percent of all bitcoin

exchange goes through them.

Bitcoin and crypto-currencies are the future of Internet commerce, forcing third

party money processor giants like PayPal and Visa need to rethink where they

stand in the money moving market when people can do it themselves. With Mt. Gox

backing a new BitcoinATM the technology will make it easier than it already is to

convert cash into coin. These advances in crypto-currency are taking the idea of

how we spend money online and turning it on its head.

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