The Crypto Currency: Bitcoin

1487 Words3 Pages

The Crypto Currency: Bitcoin

Prelude

There are lots of ways to make money: You can earn it, find it, or counterfeit it. Or, if you are Satoshi Nakamoto, you can create it. In November 2008, a mysterious entity going with the persona "Satoshi Nakamoto" published a research paper outlining his design for a new digital currency that he called bitcoin. None of the veterans had heard of him, and what little information could be gleaned was murky and contradictory. On his online profile, he said he is from Japan. His email address was from a German service, and Google searches for his name turned up no relevant information; it was clearly a pseudonym. But while Nakamoto himself may have been a puzzle, his creation cracked a problem that had stumped cryptographers for decades.

Introduction: What is a Bitcoin

Basically, bitcoin is a decentralized protocol for online payments, like a digital currency designed to allow people to buy and sell without centralized control by banks or governments, and it allows for anonymous transactions which are not tied to a real identity. The problem with purely digital currencies is that of double-spending, and the usual solution is by assigning a trusted intermediary. Visa, MasterCard, and every other bank and payment processor make sure you cannot spend the same dollars twice by deducting them from your account before they get added to someone else’s account. However, the enigmatic creator specifically tried to avoid this centralized approach in the original bitcoin design. His idea was to use cryptography to create verifiable transaction records without the need to trust anyone but your own calculations, immune to printing-press-happy central bankers and Weimar Republic-style hyperinflation .

How...

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...s, Nathan. "Bitcoin: Virtual Money Created by CPU Cycles." Welcome to LWN.net. 10 Nov. 2010. Web. 28 Nov. 2011. .

Wolf, Brett. "Bitcoin Exchanges Offer Anti- Money-laundering Aid| Reuters." Breaking News, Business News, Financial and Investing News & More | Reuters.co.uk. 15 June 2011. Web. 28 Nov. 2011.

"Virtual Currency: Bits and Bob | The Economist." The Economist - World News, Politics, Economics, Business & Finance. 13 June 2011. Web. 28 Nov. 2011. .

Cohn, Cindy. "EFF and Bitcoin | Electronic Frontier Foundation." Electronic Frontier Foundation | Defending Your Rights in the Digital World. 20 June 2011. Web. 28 Nov. 2011. .

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