Bitcoins- a complex system broken down

To begin this blog I want to clarify one thing: Bitcoins are confusing. Bitcoins are an online currency that are used for untraced, non-refundable online transactions. They operate without any central authority and are protected through cryptography. Bitcoin's value stems from consumer confidence meaning people are willing to either accept bitcoins or buy them based on what they perceive they can then sell them for in return. As of September 8th, the digital currency reached a value of $630.

The value of Bitcoin over the past 5 years.

Being a digital currency that facilitates online transactions and its protection comes from cyber cryptography, Bitcoin is inherently computer science related. However, they relate most to our in-class discussions through the way that they are "mined". Bitcoins regulate inflation through a process called "mining". This is when Bitcoin users with powerful enough computers use a special software to solve complex math problems and receive Bitcoins in return. Weird right? However, these math problems help Bitcoin's operating processes and cryptography and therefore help ensure the security of the currency. Since these problems require powerful computers and therefore would be too much for Bitcoin to manage on its own, the responsibility is passed off to its users. 

Two computers set up for Bitcoin mining

These programs and the problems that they solve are what relate to our class. They use a program with takes an input: the math problem, runs an algorithm: the software, and then provides an output: the solution/final product. This output is then rewarded with Bitcoins with then can be used for online transactions. This is a clear example of an industry which relies on computer science fundamentals in order to survive and prosper. 

References:

Pictures

• https://46qasb3uw5yn639ko4bz2ptr8u-wpengine.netdna-ssl.com/files/2014/01/mining-rig.jpeg
• http://mfi-miami.com/wp-content/uploads/2015/10/bitcoin.png
• http://www.coindesk.com/bitcoin-price-flirts-630-traders-bet-long/

Content

• http://www.coindesk.com/bitcoin-price-flirts-630-traders-bet-long/
• https://en.bitcoin.it/wiki/Main_Page
• https://www.bitcoinmining.com/