Bitcoin The End of Fiat Currency?

Bitcoin is often referred to as a digital or virtual currency. Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million BTC were created in its entirety; no more, no less.

Bitcoins are created as rewards for so-called miners. By verifying and collecting newly broadcast transactions into blocks and adding these to the chain of previously verified blocks, miners provide two critical functions: they confirm that transactions are not fraudulent, and secondly they add new Bitcoins into existence according to an algorithm that scales the rate at which they enter the market to ensure smooth inflation until the maximum supply is reached (21 million).

In order for miners to verify transactions, they need computational power which they gain from powerful processors (GPUs) connected to the Bitcoin network via specialized software - this process is known as mining. The more processing power miners have, the faster they can verify transactions and consequently earn more rewards in the form of newly minted Bitcoins and transaction fees paid by users for faster verification speeds. This forms the basis of what has become known as mining pools, where several miners share their processing power over the network to increase their chances of earning rewards.