Bitcoin

Question 1

Global
Decentralised - no central bank
Non-physical
Irrereversible transactions

A network/payment system

A bitcoin = a digital token representing value

It is NOT anonymous / untraceable

Bitcoins are stored on the internet

You only store “access” on your PC / phone

Blockchain = a digital ledger with a new page of transactions every 10 minutes

Block = a piece of data which consists of every Bitcoin transaction taking place in last 10 minutes

Public Key (SHARE) - give out to receive bitcoins

Private Key (SECRET) - spend or send bitcoins

Answer 1

Bitcoin mining - the process by which transactions are verified and added to the block chain, and the means through which new bitcoin are released.

The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult puzzle. The participant who first solves the puzzle gets to place the next block on the block chain and claim the rewards. The rewards, which incentivize mining, are both the transaction fees associated with the transactions compiled in the block as well as newly released bitcoin.

The amount of new bitcoin released with each mined block is called the block reward. The block reward is halved every 210,000 blocks, or roughly every 4 years. The block reward started at 50 in 2009, is now 25 in 2014, and will continue to decrease. This diminishing block reward will result in a total release of bitcoin that approaches 21 million.

In the future, as the number of new bitcoins miners are allowed to create in each block dwindles, the fees will make up a much more important percentage of mining income.