by Kimberly Greulich ’18

Bitcoin broke into the news a few months ago as a potentially viable currency for real use, so interested parties are trying to figure out what exactly bitcoin is, what it can do, and how it’ll progress in the future. Here are some answers for some of the most frequently asked questions about bitcoin.

First, what is bitcoin? It is digital currency allegedly used to buy anything — from a cup of coffee to a house. Bitcoin runs on its own network that does not use banks or middlemen to conduct transactions, creating a relatively small transaction fee, and utilizes a block chain ledger, a public forum where all transactions are documented in blocks. The ledger is maintained by miners, people tasked with approving and processing all bitcoin transactions using complex puzzle-solving skills, who are rewarded with a small number of bitcoins of their own. The transparent nature of the ledger prevents double-spending, the illegal copying of bitcoin software to make replica bitcoin and spend copied, technically counterfeit coins. While the block chain uses pseudonyms for all transactions, bitcoin use is not completely anonymous. Patterns in the block chain can be traced and linked to each other.

Being an electronic form of money — also called “cryptocurrency” — the potential for bitcoin inflation and its value to plummet is all too possible, so the creator of bitcoin, an anonymous person or group who goes by Satoshi Nakamoto, has planned to create and release only 21 million bitcoin, ever, and that cap has not yet been reached.

The bitcoin network is open worldwide, and a bitcoin can be bought using any method of traditional currency from anywhere around the world.