Bitcoin “Mining” and Blockchain
There are no physical bitcoins. It is not printed like ordinary currency, but rather it is created by computers through a process called “mining,” which companies like Core Scientific undertake. The creation of Bitcoin is fairly complex, and a cap has been placed on the amount of Bitcoin “mined,” which stands at 21 million. This makes Bitcoin scarce, just like other natural precious metals like gold and silver, driving up its value. As of January 30, 2021, just over 18 million have been mined.
Bitcoin is open-source. What that means is that its design is public, nobody owns or controls Bitcoin, and everyone can take part in owning Bitcoin. Bitcoins are not issued or backed by any banks or governments, so their value cannot be as easily assessed as logging into a bank account. Instead, balances are kept on a public ledger that all investors and consumers have transparent access to. In fact, all Bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, which is known as a blockchain. Some companies even specialize in hosting or providing blockchain, such as Core Scientific. The decentralized immutable blockchain where Bitcoin lives is distributed worldwide every 10 minutes.
Righting the Wrongs of Bitcoin Misinformation
While the aforementioned information is a fairly complete summary of Bitcoin for beginners, there is a lot of incorrect data out there about Bitcoin that often sticks in people’s minds. This needs to be addressed.
Cryptocurrency vs. Digital Assets
For one, many people refer to Bitcoin as “cryptocurrency.” However, this term is a misnomer. The “crypto” in “cryptocurrency” comes from “cryptography,” which is the practice and study of techniques for secure communication. “Currencies” are centralized, government-backed systems of exchange. What are commonly referred to as cryptocurrencies are better described as “digital assets,” and, indeed, recent court rulings have stated as much.
Many people assume that there is an abundance of criminal activity taking place on the digital asset networks. However, that’s just not the case. The most widely used asset for criminal activity is cash. Since transactions on the blockchain are trackable, law enforcement would have an easier time identifying criminality rather than trying to trace cash payments.
Impact on the Environment
Some prospective investors are concerned with the effects that the blockchain ecosystem could have on the environment. In fact, many believe that digital assets across a network use more energy than the current legacy system. Truthfully, replacing the current legacy system with a digital system would actually use less energy overall. The continuing innovations in the space will also drive progress in renewable energy, which, by nature, cannot be depleted. With zero input cost, renewables are the best energy sources in the long term.
To learn even more about Bitcoin, including its history and future, check out the history of Bitcoin Insights article.