Bitcoins Creation Process
The Bitcoins they can be ‘coined’ by anyone in general who has a good computer. These are produced through a very interesting self-limiting system called ‘mining’.
It is self-limiting, because it will only be allowed that a maximum of 21 million bitcoins can exist, of which approximately 11 million have already been mined and are in current circulation.
Bitcoin mining It involves spending many hours a day in front of your personal computer to solve certain tests (computationally intensive math problems). Each mathematical approach to Bitcoin has a set of possible 64-digit solutions. A laptop, if it ran non-stop, might be able to solve a bitcoin problem in two to three days minimum.
For each bitcoin mined (elaborate) on your personal computer, it is possible to earn maybe 50 cents to 75 cents a day, minus your electricity costs.
But for a large-scale miner running 36 powerful computers simultaneously, that person could earn up to $ 500 per day, after subtracting costs.
In fact, if you are a small-scale miner with a single intermediate capacity computer, you are likely to spend more on electricity than you will earn from mining bitcoin.
Bitcoin mining is only really profitable if you run multiple machines, and if you join a pool of miners to combine the power of your hardware. This prohibitively high hardware requirement is one of the biggest security measures that deters people from trying to tamper with the Bitcoin system.
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Bitcoin security
Bitcoin is as safe as if you owned the coins in physical metal. But just like having a bag of gold coins, only a person who takes reasonable precautions will be safe from having their personal cache stolen by hackers.
his bitcoin wallet It can be stored online (that is, a cloud service) or offline (a hard drive or USB stick). The offline connection method is more resistant to being hacked and absolutely recommended for anyone who owns more than 1 or 2 bitcoins.
However, beyond hacker intrusion, the highest risk of losing bitcoins revolves around not having a fail-safe backup of your wallet.
There is an important .dat file that is updated every time bitcoins are received or sent, so this .dat file must be copied and stored as a double backup every time you carry out purchase and sale transactions.
Safety note: The collapse of the Mt.Gox bitcoin exchange service was not due to any weakness in the Bitcoin system itself. On the contrary, that organization collapsed due to mismanagement and its reluctance to invest in security measures.
Mt.Gox, you could say, acted like having a large bank without security guards, and paid the price.
Bitcoins abuse
Currently, there are three known ways that the Bitcoin currency can be abused.
1) Technical weakness – confirmation delay time: bitcoins can be double spent in some rare cases during the confirmation interval. Because bitcoins travel from point-to-point there is a delay of several seconds for a transaction to be confirmed.
During these few seconds, a rogue person using fast clicking could present a second payment of the same bitcoin to a different recipient.
Whereas the system ultimately recognizes double the expense and denies the second dishonest transaction, if the second recipient transfers the goods to the dishonest buyer before receiving the confirmation, then the latter would lose the payment and the goods.
2) Human dishonesty – organizers of the groups that take unfair portions: Because the bitcoin mining best achieved through working together (joining a group of thousands of other miners), the organizers of each group are given the privilege of choosing how to divide the bitcoins that are discovered. The organizers of rogue mining pools could then take more bitcoin for themselves.
3) Human mismanagement – online exchanges:
With Mount Gox as the biggest example, the people who run unregulated online exchanges that trade cash for bitcoins can be either dishonest or incompetent.
This is the same as Fannie Mae and Freddie Mac, investment banks that have failed due to human dishonesty and incompetence. The only difference is that conventional bank losses are partially insured for bank users, whereas Bitcoin exchanges they do not have insurance coverage for users.
Four Reasons Bitcoins Are Great Business
There is a lot of controversy surrounding bitcoins. These are the main reasons:
1) Bitcoins are not created in any central bank, nor are they regulated by any government. Consequently, there are no banks to record your money movements, and government tax agencies and the police cannot keep track of your money.
This is sure to change over time, as unregulated money is a real threat to the control of governments, taxes and the police.
In fact, bitcoins have become a tool for the smuggling and money laundering trade, precisely due to a lack of government oversight. The value of bitcoins skyrocketed in the past because wealthy criminals were buying them in large volumes.
2) Bitcoins completely evade banks. These are transferred through a peer-to-peer network between individuals, with no intermediary bank keeping a piece of the pie.
The Bitcoin wallets they cannot be seized or frozen or audited by banks or law enforcement agencies. Wallets cannot have spending limits nor can any withdrawal be imposed on them. For everyone: no one but the owner of the bitcoin wallet decide how your wealth will be managed.
This is really a threat to banks, as you can imagine.
3) Bitcoins are changing the way we store and spend our personal wealth.
Since the advent of printed (and eventually virtual) money, the world has turned over the power of currency to a central mint and banks. These banks print our virtual money, store our virtual money, move our virtual money, and charge us for their intermediary services.
If banks need more currency, they simply print more or evoke more digits in their e-books. This system is easily manipulated by banks as paper money is essentially paper checks with a promise of value, with no real physical gold behind the scenes to back those promises.
Bitcoins are designed to put control of personal wealth back in the hands of the individual. Rather than paper or virtual bank balances that promise to have value, bitcoins are real bundles of complex data that have value in their own right.
4) Bitcoins transactions are irreversible.
Conventional payment methods, such as a credit card charge, a wire transfer, personal checks, or wire transfers have the advantage that they can be insured and reversed by the banks involved.
In the case of bitcoins, every time a coin changes hands and purses, the result is final. At the same time, there is no insurance protection for your Bitcoin wallet: If you lose your data wallet on your hard drive or even the wallet password, then the contents of your wallet will be gone forever.
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