A Crypto Currency is a digital medium of exchange that functions similar to traditional money, but has no physical equivalent and is in digital form. Bitcoin is the first peer-to-peer digital crypto currency that was launched back in 2009 as an open source software.
This technology uses cryptography algorithms to control the creation and transfer of digital money. Users send payments by broadcasting digitally signed messages to participants in the decentralized network. Miners validate these transactions by verifying and time-stamping them into a shared public database called the block chain.
Bitcoins can be acquired by mining or in exchange for products, services, or other currencies. There are a number of Bitcoin exchanges where you can trade BTC for real money or other crypto currencies. Its price volatility is a major concern for merchants that are considering accepting Bitcoins as a means of payment. There are a number of alternatives to Bitcoin that uses SHA-256 as its proof-of-work scheme; this includes Namecoin, Devcoin, Peercoin, Terracoin, Zetacoin and more.
With a powerful hardware, mining alternate crypto currency and trading it for BTC can also yield a better profit than mining Bitcoins directly. Crypto Currencies are considered an anonymous and untraceable means of payment. They are produced at a rate which is bound by a value both prior defined and publicly known. Directly circumventing Bitcoin’s security is very challenging as it needs computational power greater than that controlled by the entire swarm of miners and even tech giants like Google.
Crypto Currencies tend to experience hyper-deflation as they grow in popularity and the amount of currency in circulation approaches a finite cap. A new crypto currency Litecoin, which has a different work-of-proof scheme offers faster transaction confirmations. Another alternative Peercoin (XPM) uses a proof-of-work/proof-of-stake hybrid that is different from the other two.
Although mining of Bitcoins seems simple enough, the process takes a lot of work and a lot of hardware that needs to be upgraded regularly. Buying or creating a Bitcoin miner has become very competitive, and having bigger and better miners will help earn more money compared to less capable ones.
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