What You Need To Know About Bitcoin
The value of the digital cryptocurrency bitcoin has been all over the map recently, reaching a high of about $20,000 per coin late last year to nearly $14,000 this week. That's a big leap for something that was worth just a dollar in 2011.
But what exactly is bitcoin?
John Podolanko, a computer science graduate student at the University of Texas at Arlington, recently presented a paper on bitcoin.
Interview Highlights: John Podolanko ...
On the nature of bitcoin:
Bitcoin is essentially just a peer-to-peer community where multiple parties run the same code that allows them to perform cryptographic algorithms that allow to you to create currency and conduct transactions.
It's difficult to explain, but take Uber, for instance. They're the world's largest taxi company and they have no vehicles; they have no inventory. Ali Baba is the world's largest retailer and has no inventory. With computers, you are able to do this stuff. You are able to store digital bits of information and share them with the world.
Bitcoin exists only on computers. It exists nowhere else. You can't literally pull it off of your hard drive or anything like that. You can just copy it from one source to another. The cryptography behind it basically allows you to conduct financial transactions, so to speak.
On how bitcoin is accounted for:
Whenever you create a bitcoin account, if you actually download the entire blockchain, you can track every transaction that has ever happened in the entire bitcoin network. A blockchain is a series of blocks; one block consists of a number of transactions and once those transactions are put into a block, they are confirmed. It is like "pending" versus "posted" in your bank account, for instance.
So, before it gets put into a block, it's a pending transaction. Once it posts, it gets added to a block, and the block gets appended to a chain.
You can't just create random transactions and attach them to the blockchain; there is a cryptographic algorithm that needs to be achieved. Because of that security, that is why the blockchain is pretty much nonbreakable.
On the demographic bitcoin appeals to:
As with anything, there are big black market dealings with bitcoin, mainly because the government can track account numbers, but they can't actually track who owns those account numbers. You can follow the money everywhere starting with account numbers.
The safest thing for the cyber criminal is never take it out of bitcoin, and they can never be traced.
John Podolanko is a computer science graduate student at the University of Texas at Arlington.