Bitcoin Mining is based on Blockchain Technology
Bitcoin, the first and most important cryptocurrency was created in 2008. The real identity of the creator, Satoshi Nakamoto, still remains a mystery. It is a pseudonym that could refer to an individual or a group of people who were the very first cryptocurrency users or miners. Satoshi Nakamoto started to write about the Bitcoin in numerous forums and groups on the internet. By 2011, Bitcoin had become a popular cryptocurrency. Many more such digital currencies have been developed and used since then.
In the early stages of human development, trade and commerce involved the barter or exchange of goods and services. Sweat equity and slave labor, or forced labor, were also major methods of gaining services. The evolution of human society further necessitated the introduction of currencies. These were mainly in the form of gold, silver, and metal coins. Then came paper notes or paper currency. Eventually, our civilization reached a stage where plastic money and electronic transfer became predominant. With the proliferation of computers and the internet, cryptocurrencies or virtual currencies are now in vogue. While they may not be strictly legal in many countries, the use and exchange of cryptocurrencies have made most governments and banking institutions acknowledge their existence.
Cryptocurrencies or digital currencies are virtual currencies that have been built on a decentralized peer-to-peer network. These are intangible assets that take the form of virtual coins (tokens). Cryptocurrencies have been created using advanced code systems or cryptographic protocols making them very secure and impossible to replicate.
Cryptocurrencies are decentralized – this means that their value, supply, and exchange is not controlled by governments and other regulatory authorities like central banks. They are controlled by highly complex protocols that are defined by the crypto codes on which these currencies are based. The users (called miners) themselves play an important role in the regulation of the cryptocurrencies.
Bitcoin mining is based on blockchain technology, i.e., new bitcoins are generated through computing actions on a virtual currency network. Each ‘block’ on the blockchain is unalterable, due to the complex process of its creation or ‘mining’ through verified transaction records. A transaction is added to the blockchain only when it is completely secure, complete and verified from multiple sources. Miners automatically receive a reward for solving a ‘block’, but the issuance of reward is regulated by an algorithm which adjusts the difficulty level of the Proof of Work. Due to the nature of its complexity, blockchain technology is considered confidential.
While Bitcoin is certainly considered to be the first of its kind cryptocurrency and a trendsetter, it is certainly not the only one. A number of other altcoins or cryptocurrencies modelled after Bitcoin have been created. Most of them are improvised versions that are easier to mine. What is important is that cryptocurrencies are being created even now and it is impossible to come up with a complete list. Currently it is estimated that there are over 1600 cryptocurrencies in existence. Here are a few important ones, other than Bitcoin itself –
The legal status of cryptocurrencies differs from country to country. In the vast majority of countries around the world, there are no clear legislative regulations regarding the use of bitcoins or other cryptocurrencies, and the regulatory landscape is still evolving.
In the US, bitcoin is classified as a decentralized virtual currency that can be converted to other currencies; it is also traded as a commodity and taxed as a property.
In a number of other countries such as India, there have been concerns that cryptocurrencies may be used for money laundering, or to fund terrorist and other criminal activities. Many such countries have laws and regulations against the mining, distribution, and use of cryptocurrencies.
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