How does the virtual currency Bitcoin work? “As with Skype, each Bitcoin user downloads and runs a P2P client program on their PC that communicates with similar programs being run by other users. Then a lottery ensues: the software on each P2P client runs a mathematical routine that attempts to generate a number lower than a constantly changing target figure. Every 10 minutes, one client succeeds and is rewarded with a certain amount of virtual money… The bitcoins can then be used to buy services such as web design or various types of goods that include T-shirts and ground coffee.”
What’s the Big Idea?
Where do the value of Bitcoins come from? From the willingness of the public to accept them as public tender: “They can be exchanged for conventional currency at a rate that is now hovering around 1 BTC equating to $8, making the entire Bitcoin economy worth around $50 million. ‘The idea of money created and controlled by everybody instead of elite central bankers seems to strike a chord in a lot of people all over the world,’ says Gavin Andresen, the lead developer of the Bitcoin project based in Amherst, Massachusetts.”