Bitcoin is not the first electronic currency, Linden's Second Life or even Vcoin of VTC was born a long time ago Bitcoin. However, the increase / decrease in the price of copper Bitcoin rapidly in recent months has attracted worldwide attention, sparked heated debate. So what is behind Bitcoin Council and its fate in the future will turn out

No bank, no border. We believe in encryption - the slogan of electronic currency Bitcoin.
1. All official currency ever, whether paper or electronic cash money, have a common characteristic is to be "under one roof", ie as a single entity issuing, ensure and implement the "clearing" (clearing) in many cases. The reason the official currency required state agencies pledge to those who use it believe in the ability to "stored value" of money they hold do not lose too fast (remember here only a necessary but not a sufficient condition, but many official currency is depreciating too fast and people / users find ways to not hold them too long). Bitcoin is the first coin without bail state agencies, from the stage of issuance until the "clearing".

Bitcoin inspired form peer file sharing via bittorrent, however its creator, Satoshi Nakamoto, had the brilliant idea to overcome the difficulties that a peer electronic currency will meet right. The first obstacle is who is going to release the money, and how to allocate the new money is created out how to work with? If you remember these coins in the island Yap stone money is the informal nature (as many coins as other commodities, has such properties), meaning that people create money and Self talk to each other without the intervention of state agencies. But to get the new money, people Yap Island to spend time, effort, and exploit new resources. The idea of ​​bringing functional currency "stored value" as well as "stored labor" has from ancient times been used in Yap Island several centuries ago, and until 2009 was applied Satoshi Nakamoto Bitcoin.

In principle, all those involved in the Bitcoin network can co-create new Bitcoin - the process of creating a new currency called "mining" (mining). Perhaps the term "mining" is chosen not by accident because the money creation process is similar mining process in two important points. First you have to put effort and time to "dig", you also need to have "capital" to do this. If you only have the "capital" but do not know how or do not have time, you can lease back "capital" for those who do their own services ('ll explain further below). Second, the number of Bitcoin you "dig" is decreasing over time (a form of non-renewable resources) and vary depending on number of participants "dig", as many people dig the time and effort you spend Bitcoin going to have a more costly.

Bitcoin skyrocketing price of copper last year, from less than US $ 10 earlier this year to nearly $ 200 in April and $ 1,100, equal to 1 ounce of gold, at the end of the year.

2. So the "mining" How specific? Before answering this question should refer to the second challenge an informal money, that's the problem, "clearing" the monetary system. Except for the two parties to paper transactions can "clearing" together, the different types of electronic money (including checks and electronic funds transfer, credit card or cash system based on paper) Each requires a (few) central "clearing". For example, if you purchase by credit card, the process will usually due to some commercial banks may undertake or involvement of the central bank or the international financial institutions to cash flow cross-border flows (eg Visa, Paypal, BIS). This process can take place in 1-2 seconds but also in a few days.

The goal of the system is to create a form Bitcoin money "peer" means the process can take place between two trading partners just like to pay by paper money or other commodity currencies. But how sellers can ensure the Bitcoin received from the buyer not be faked without a third party check? Here the concept of counterfeiting is not merely to create a co-buyer Bitcoin can assume that he used a real Bitcoin purchase contract in different places. Satoshi Nakamoto's solution is to use the Bitcoin network performs the function of clearing and those who put effort and computing power to handle this task will be rewarded with a new contract Bitcoin.

So in fact Bitcoin system does not eliminate the central clearing just switch places in the official monetary system into a central clearing informal. Another interesting point is between the Bitcoin system and a money system has a modern formal similarities of the possibility of counterfeiting money. With a money system of a country, an author who can make money if you have the resources (technical, financial and labor) are strong enough to compete with the release of money - here is the state. In the Bitcoin system, an author who can make money if the computing capacity of him compete with the computing power of the others involved in management of the system. Because Bitcoin system is relatively small, the probability that a person or a group of people can gather enough computing power to make counterfeit money is a real risk, and that is the weakness of the monetary system this.

1 9c185 Bitcoin 1 1390548464355 Liquid story behind Bitcoin currency
To "mining" Bitoin need huge computing systems, consumes a lot of power. Photo Wired.com
3. The process of clearing the Bitcoin system as follows. Every time a transaction is made, the details of the transaction were announced publicly for the entire system and those who are engaged in service to handle the transaction will be recorded in a ledger. With the official monetary system, the central clearing will do it and no one can forge a book unless you break into the server and change the contents of the book. In Bitcoin ledger system is divided into blocks (blocks), each block contains the hash (SHA-256) (to be explained below) of the block and the transaction before it will appear with a number random. The mission of the members of the Bitcoin network is calculated hash for the new block to appear. The hash calculation for a text as explained above is not difficult, but Satoshi Nakamoto has a very smart initiative is required to calculate the hash number is less than a certain amount (can change). If you calculate the hash sequence number larger than this, you must change the random numbers in the block and the new hash.

(Basically hashing is a process of coding a sequence of data into a series of numbers (hash) have fixed length and are not duplicated. For example, you can use the method SHA-256 hash to a text ( with arbitrary length) into a sequence of length 256 bits. This chain of "unique", ie any other text if only one character can have identical hash).

All participants will race against each other to calculate the hash of the "right" to the newly created block. Once someone calculate it, the other members will be easily verified and block that will become the official record transactions for the entire system. When you use a Bitcoin his contract to buy a certain product, the seller will wait until the transaction between you and him are recorded on a block officially recognized, ie the hash has already reached New accept delivery. Speed ​​network processing block and create hash depends on two factors: the number of people (and computing power) involved in the transaction processing task and the level of rates are set. The algorithm of the Bitcoin system will change certain level (the number of participants changed) to ensure every 10 minutes there will be a new block is created, ie the number of people participating in winter it will be difficult to achieve get more. With online trading activities, the latency of about 10 minutes are acceptable.

Come sure you have guessed the newly created Bitcoin like. Member solve hash for a new block will be "paid" by the amount of new Bitcoin released. Thus "mining" the new contract is Bitcoin products processing transactions. Want to make money, they must give up (and computing power) to serve the community. At this point Bitcoin system is designed very cleverly and better system of stone money of Yap Island or even the system needle position before in history (the quarrying or go digging for gold entirely for-profit himself, not for the community - except liquidity to the economy).

Initially "wages" for a block of 50 Bitcoin, then this amount decreased by 50% after each block is generated 210,000. The idea of ​​decreasing the number "wages" is probably derived from the concept of non-renewable resources and will make a total circulation Bitcoin to figure gradually approaching 21 million. In addition to obtaining new contracts Bitcoin, the member may charge a fee for handling large transaction, it may be a solution to attract people to participate in the future to limit the number of Bitcoin. Of course, the more difficult it is to create Bitcoin is increasing its value, in other words, prices in the economy using Bitcoin transactions will be deflation. However the speed of deflation (and money supply growth) can be determined quite accurately, so we will calculate the exact price based on the speed of deflation. This is the idea of ​​Milton Friedman urged repeal and replace the Fed with a computer running a predetermined algorithm to calculate the growth rate of the money supply is fixed.

As noted above, all members of the Bitcoin system have the right to participate in the transaction process to get the new Bitcoin contract. However, this requires you to have strong computer and information technology degree to programming. Without knowledge, you can lease your computer for a professional team capable of operation / management processing operations (ie, to collect information about the new transaction, calculated hash, check hash ...). Of course, your computer must be connected to 24/24 and really strong, the new good (most of the participating computers are using GPU processors alongside CPUs to perform computing tasks in parallel).

The mobilization of a large amount of computing power involved in the processing of transactions have important implications for Bitcoin system. If the number of computers too little, an imposter can raise larger amounts of computer to create a fake ledger, ie calculate the hash for the new block faster entire system.

A coffee shop in the Netherlands accepts payment in Bitcoin. There are approximately 35,000 business units accept this currency. Photos Wikipedia
4. The law of most countries have banned or private organizations released a parallel currency to the national currency. In addition to the political aspects and cultural, and economic causes of the state monopoly money issuance related to the national tax system. Exclusive pre-release is an effective measure to a state can collect taxes from the people, can directly through the direct taxes / excise or indirectly through inflation and release the money. One of the common ways of tax evasion in most countries are dealing with cash, Bitcoin informal nature is "cash" in the era of everything "online". Once the transaction is done via Bitcoin, state tax is only collected when the parties to "voluntarily" to submit, would be extremely difficult for the tax authorities investigate or monitor economic activity in the system Bitcoin system. Of course since this Bitcoin network created by the State should also lose revenue due to inflation.

Like the Internet, the system Bitcoin and Bitcoin currency would not have borders (except of course the water a firewall), meaning that Bitcoin is likely to become an international currency payment if money was not stillborn . Imagine a day when a small textile business in Vietnam is Walmart with Bitcoin payment directly, not through any bank and are not at risk, "the Exchange". In reverse, a small investment in a small province of Vietnam can easily open an account and transfer Bitcoin abroad to "hit gold" on a trading floor in Dubai or Hong Kong, but no one compartment is prohibited.

On the national level and international issues such as currency wars, currency speculators will disappear. Surplus or deficit will only difference is the result of productivity and savings rates not related to the exchange rate as well. Of course the central bank is no longer a role and will disappear along with the concept of monetary policy. One scenario is quite similar to the needle returns to the position.

But there is an important difference between the metallic taste and Bitcoin system. If only "God" created a new element with the characteristic 79 "gold" as such, any time can appear / Satoshi Nakamoto several other contracts with the new Bitcoin may also favor Vietnam Bitcoin more current contract. Meaning that the foreign currency traders will no longer worry about unemployment Friedrich Hayek would "smile where nine streams," because the dream of a competitive currency does not belong to any country to become a reality.
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