On the net we hear about them more and more often and recently some “real world” shops have begun to accept them as a payment system for their products and services. I’m talking about BitCoin, the digital money destined to revolutionize monetary transactions around the world. But what exactly are BitCoins and how are they used?
BitCoin, the electronic money known with the BTX or XBT symbol, is an electronic money invented in 2009 by an anonymous person known under the pseudonym of Satoshi Nakamoto , implementing an idea presented on the Internet at the end of 2008 by Nakamoto himself. The three fundamental concepts to understand what BitCoins are are:
BitCoins are digital certificates
As a central bank that regulates issuance and transactions, BitCoins use a database distributed on a P2P network (such as that of eMule and Torrents) that keeps track of transactions to prevent a coin from being spent more than once.
Each user can have a wallet type that contains the BitCoins. The transfer of these digital certificates takes place between two users who have a BitCoin address. In operation it is very similar to that initially developed by Paypal.
How a BitCoin is made:
Each Bitcoin is a small digital file divided into three parts: its identification address (about 34 characters), the part that contains the history of who has spent or collected it and a third part which is the most complex part of the BitCoin . This third part contains the private key header. This part is the place where the digital signature information is stored for the verification of every single transaction of each BitCoin. These digital signatures are the Bitcoin security system: every single transaction is stored and entered in the distributed database in order to ensure that the coin is not spent twice, perhaps by duplicating the file.
Bitcoins are extremely safe because the transaction history of each individual coin is stored within the coin itself.
So can people see my BitCoin transaction history?
It is not possible in any way to trace the identity of the people, but it is possible to see all the transactions of each single currency. This feature helps discourage the use of Bitcoins for illegal purposes.
Each person participating in the Bitcoin network owns a wallet that contains an arbitrary number of pairs of cryptographic keys. Public keys act as sending or receiving points for all payments, which is why they are considered Bitcoin addresses. The corresponding private key authorizes payment only to the user who owns a certain currency. The addresses contain no information about their owners and are generally anonymous.
Who creates the bitCoins?
The creation of Bitcoins is referred to as “mining”, a term analogous to gold mining (gold mining). The Bitcoin network randomly creates and distributes a certain number of coins, about six times an hour on clients that have the “generate bitcoin” option enabled. The probability that a certain user receives the coin is directly proportional to the calculation capacity made available by the user’s computer. The number of Bitcoins created for each mining operation was initially 50 BTC; this amount has been programmed to decrease over time, with a halving of the premium every 4 years, until it reaches zero, so that no more than 21 million bitcoins will ever be created in total. As of November 28, 2012, the reward has increased to 25 BTC per block, and will do so for the next 4 years. As the reward for your calculations decreases over time,
How do transactions take place?
As mentioned above. bitcoins contain their owner’s public key (i.e. address). When a user A transfers money to user B he renounces his ownership by adding B’s public key (his address) on the coins in question and signing them with his own private key. It then transmits these coins in a special message, the “transaction”, through the peer-to-peer network. The rest of the nodes validate the cryptographic signatures and the amount of digits involved before accepting it.
Who accepts them?
As mentioned at the beginning in the “real world” there are those who have begun to accept payment for their products and services; here are some examples of Italian businesses that accept payment in Bitcoin.