Bitcoin is probably the most commonly-known cryptocurrency today. Unlike US dollars, bitcoin doesn’t have government regulations or banks to back it up. Instead, it uses peer-to-peer technology to legitimize its credibility in a virtual world. Without government or banks, the fees are kept to a minimum, but bitcoin’s value is volatile if you wish to trade and exchange it for other government-issued currencies. To understand better, you might find it helpful to read our first two blogs on bitcoins and cryptocurrency.
When it comes to our money, a central server prevents fraud and double spending. For cryptocurrency, however, a server doesn’t exist, instead there is a peer network of computers around the world that receive a complete history of all transactions, and thus a balance of every account. Every bitcoin unit is accounted for, and every peer in the network must have matching transactions.
The technology requires what is called bitcoin mining. The transactions must be validated and confirmed, and to do so, bitcoin miners do the calculations and confirm the transactions are valid, afterward adding the information to the database. This information creates what is called a blockchain -- a history of transactions. Bitcoin miners are rewarded with bitcoins if they are the first to calculate the validity of the transaction.
In 2018, the reward for successfully mining a block is 12.5 coins, which is equivalent to about $100,000 depending on the bitcoin trade price!