Although It has only existed for a few years, the story of bitcoin has already come very far as being one of the most innovative business ventures to date. The bitcoin market is a radical and self-regulated economy where miners and users are making the market as they progress. Crypto-currency pioneers are forming start-ups in their basements that will see millions of Crypto of bitcoins mined and traded. Bitcoin is the first and foremost of the new wave known as digital or crypto currencies on the web. Crypto currency is a type of digital virtual currency that uses complex sequences of numbers, digital signatures, and distributed computing to generate currency, verify transactions, and secure its transaction ledger (DiLasci).
The reason for bitcoins success is its infinitely accessible nature. Exchanges can be made between any two parties with Internet access and a bitcoin wallet from anywhere in the world. Transaction records for bitcoin transactions are recorded on the block chain, a decentralized ledger that requires the efforts of pooled miners to validate and approve the transactions. This makes transactions much quicker and more secure for both the receiver and sender.
Bitcoin is still an up and coming industry, so at this point in time the amount of retailers and vendors that accept bitcoin are fewer. However, the currency has become very prominent in certain markets such as technology hardware and any service provided across international lines. Transactions are relatively simple as well. Parties can send coin to each other simply by knowing the others 26-34 character unique wallet address or by scanning their QR code.
Industry opportunities in the crypto-currency business are booming. There are several sectors in which potential prospects can take advantage of this thriving field. These include, but are not limited to: bitcoin mining, bitcoin exchanging, bitcoin wallet hosting, and block chain technology. Several of these sectors may require a hefty initial investment to enter the market, but the rewards for those who take the risks may be worth the reward.
Bitcoin miners are the backbone of the bitcoin platform and block chain functions. Bitcoin miners serve a few purposes for enabling the bitcoin network. The immediate purpose of the bitcoin miner is to produce randomly generated answers to algorithmically locked "blocks". Mining was initially done with CPUs from normal personal computers. However as miners discovered the much more powerful capabilities of GPUs, the block-solving difficulty increased and GPUs became dominant (Kelleher). Soon miners discovered the much more powerful ASIC processor that is the industry standard to this day.
The process by which participants in bitcoin mining receive their coin is through "block rewarding". The blocks are the end results that are currently consisting of 25 bitcoins per block. Blocks were previously worth 50 bitcoins per block but as a result of the "halving" the reward became half of the previous reward. Halving will happen again once a certain amount of coin has been rewarded. Overall, it is said that there are 21 million bitcoins to be found in bitcoins code (Donnelly).
Miners also contribute to the block-chain by assisting with transaction processing. When a transaction is made, each block is evaluated through thousands of mining units to determine whether the block is suited for the block-chain. It is for this reason that if miners were to retire from the bitcoin industry, that the block-chain would come to a halt without miners to verify transactions. This threat is being combatted through a system where miners are rewarded with transaction fees at an increasing rate (Kelleher). This works through the efforts of trading platforms and wallet operators who share a portion of each transactions bitcoin with the miners who facilitated the transaction.
Crypto-Currency wallets are the technology that allows individuals to store their coins on computer hardware. Wallets can be bought in the form of small thumb drive sized hardware, but most wallet services utilize your computer or phones hard drive. The main function of the wallet however is only to house your public encryption key that identifies you as the owner of the wallet. Popular wallet services include Electrum, Circle, and bread wallet. These services are generally free and gain revenue through small transaction fees that are also split with the mining community.
Perhaps the most exciting development through the hectic history of bitcoin is the implementation of block-chain technology in the financial industry. Originally designed as a decentralized crypto-currency distribution system, block-chain is now proving to be the potential for future financial systems. Firms such as JP Morgan, Bank of America, and Microsoft have all announced future services featuring block-chain technology (Marr).
Companies individual chains used to conduct transactions are essentially just online databases. The firms operate these chains, but their customers who utilize it are also the regulators and operators. This model allows for a self-governing financial system in which it is much harder for the end consumer to be taken advantage of or lose money in the case of a financial crisis.
Block-chain technology is pre-programmed to handle various financial tasks and day-to-day errors. Many bank workers are allotted and salaried to perform task such as: recording transactions, verifying transactions, verifying identities, and preventing fraud. Block-chain technology is able to save time and money by fulfilling all of these rolls for a business (Marr).
Block-chain technology is not all foolproof however. The decentralized design of the block-chain network for the most part creates security and assurance that transactions are safe and validated each and every time. The decentralized system will only be effective if each single party possesses no more than 51% of the mining hash rate within the block-chain (Marr). In this scenario, the party with the dominant hash rate could potentially reconfigure their mining unit code to disrupt or hijack the flow of the block-chain. This is the main draw back to the block chain system, especially in commercial applications where banks with large amounts of capital could potentially overrun their chains if they chose to do so (Marr).
The history and development of crypto-currencies and block-chain technology have been short lived, but are surely paving the way the future of financial transactions. Block-chain has already penetrated the big players in the banking and technology industry and this is surely only the tip of the iceberg for future block-chain models. Crypto-currency is bringing the power of money back to the people, providing inflation protection for those in countries facing economic crisis. Crypto-currency also can potentially free citizens from the risky practice of holding their money within big corporate banks.
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Smith, David. Bitcoin Industry Overview http://www.bitcoinbulls.net/assets/bitcoin-industry-overview.pdf. retrieved December 7, 2016.
Crowe,P. (2015 March 05). There is a 'game changer' technology on Wall Street and people keep confusing it with bitcoin. Retrieved December 09, 2016, from http://www.businessinsider.com/what-is-blockchain-2016-3/
Kelleher, John. What is Bitcoin Mining?. Investopedia web site. http://www.investopedia.com/articles/investing/043014/what-bitcoin-mining.asp. Accessed December 7,2016.
Donnely, Jacob. (2016 June 12) http://www.coindesk.com/making-sense-bitcoins-halving/. Accessed December 7, 2016
Marr, Bernard. (2016 May 27) How Block-chain Technology Could http://www.forbes.com/sites/bernardmarr/2016/05/27/how-blockchain-technology-could-change-the-world/2/#bac33f9d02ee. Retrieved December 7, 2016.