What is Bitcoin? Bitcoin is a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems. It’s the first example of a growing category of money known as cryptocurrency. What is cryptocurrency? A cryptocurrency is a digital or virtual currency that uses cryptography for security. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation. Bitcoin is a decentralized form of money. That means no government or bank controls it. How does Bitcoin work? Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. What is Bitcoin mining? Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. Bitcoin nodes use the block chain to differentiate legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere. How does one 'mine' Bitcoin? Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. Bitcoin nodes use the block chain to differentiate legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere. Mining is an energy-intensive process of verifying blockchain transactions. Miners are rewarded with cryptocurrency for their efforts. The more miners there are, the more secure the network is. Bitcoin mining is often criticized for its high energy consumption. One estimate is that each Bitcoin transaction requires the same amount of energy as powering 1.57 American households for a day. However, there are also estimates that only a fraction of one percent of the world’s energy consumption is devoted to Bitcoin mining. And as the network grows, the energy required for each Bitcoin transaction will grow along with it. As more people use Bitcoin and more businesses accept it, the energy consumption will continue to rise. But there are also more and more ways to make Bitcoin mining more energy-efficient. Some Bitcoin miners have even started using renewable energy sources like solar and wind to power their mines. There are also companies working on developing more energy-efficient Bitcoin mining hardware. BitFury, for example, is working on a Bitcoin mining chip that is four times more energy-efficient than the current generation of chips. All of these developments are making Bitcoin mining more environmentally friendly. So, while Bitcoin mining is still a relatively energy-intensive process, it is becoming more efficient and more sustainable.
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