- There is therefore no way for a central bank to issue a flood of new Bitcoins and devalue those already in circulation.The entire network is used to monitor and verify both the creation of new Bitcoins through mining, and the transfer of Bitcoins between users.
- A log is collectively maintained of all transactions, with every new transaction broadcast across the Bitcoin network.
- This process, which is computationally intensive, is in fact the process used to mine Bitcoins: roughly every 10 minutes, a user whose updates to the log have been approved by the network is awarded a fixed number of new Bitcoins.
- This has prompted Bitcoin fans to build ever more powerful computers for use in Bitcoin mining.Bitcoins (or fractions of Bitcoins known as satoshis) can be bought and sold in return for traditional currency on several exchanges, and can also be directly transferred across the internet from one user to another using appropriate software.
- Just as BitTorrent was not the first file-sharing service and Skype was not the first voice-over-internet service, it may be that Bitcoin will be a pioneer in the field of virtual currencies, but will be overshadowed by an easier-to-use rival.Update: This blog post has been amended to remove the news peg.
@TheEconomist: “Bitcoin has been around since 2009. How does the digital currency work?” open tweet »