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  • Surely, many of you have heard of such a thing as Bitcoin. You may even know that it is a cryptocurrency that can be used to pay online without having to pay interest to banks and other familiar financial institutions, and that bitcoins can be mined at home without getting up from the couch. But let’s take a closer look at how it all actually works.

    Perhaps it’s worth starting with the main features. Bitcoin is a peer-to-peer, decentralized and anonymous cryptocurrency. This translates into public Russian as follows: all transactions take place directly between the subjects on the p2p (peer-to-peer) principle; there is no central currency governing body and emission centers such as a central bank (decentralized); all transactions made from one subject to another occur using cryptological (encrypted) keys that protect the transfer from the intervention of third parties (cryptocurrency).

    I want to note right away that there is a common misconception that Bitcoin is another currency that can be printed in any quantity if you get access to the appropriate machine. This is not entirely true.

    When Bitcoin was created, the main idea was to make not analogs of paper currency, but an analogue of gold - that which most of modern money is confirmed by. What distinguishes gold from dollars, euros, hryvnias or rubles? Gold is a limited resource. Those. gold cannot be mined more than there is in nature. Of course, you can create some gold, for example, by bombarding mercury with heavy neutrons, but its amount will be extremely scanty, and the state of the obtained isotopes is unstable.

    To get gold, you need to get it. This takes the time of people who are directly involved in this [gold mining]. As a result, a kilogram of mined gold can be equated to the man-hours required for its extraction and further used as an equivalent of free labor, i.e. currency. Also, you can exchange cryptocurrencies through the platform Alligator.

    Something similar is happening with Bitcoin. The number of “coins” is limited to 21 million. When the total supply of bitcoins reaches this value, any further emission will cease to prevent inflation. And mining bitcoins requires certain costs. If, in the case of gold, human labor is spent on mining, then the “labor” of a computer is spent on mining bitcoins.

    If for the extraction of gold a person must take the rock, wash it and thus separate the gold from everything else, then for the extraction of bitcoin the processor needs to solve a number of mathematical problems. If the result meets all the criteria, bitcoin is created. By the way, the process of mining cryptocurrency is called “mining”.

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