How does bitcoin work?
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How does bitcoin work
Bitcoin, being a decentralized currency, has to be based on something other than a nations gold supply.
Who runs Bitcoin
Nobody. Everybody. You run bitcoin when you start mining, and the collection of Bitcoin miners across the world all combined run the network. Since the controlling entity of Bitcoin is a distributed network of computers across the globe, shutting down 1 node cannot shut down the network. Similar to the torrent download protocol, the network is split up into so many parts, you would have to shut down ALL of them to stop the Bitcoin. As long as 1 person has a mining rig, Bitcoin is alive.
Where does the Bitcoin come from
The Bitcoin network has a maximum amount of Bitcoins that will ever be brought into existence (21 million coins). Coins are brought into existence based on CPU power total-- the more miners, the more of those 21 million coins come into circulation. Now there are about 9 million Bitcoins left to be "discovered" by mining. As this number of undiscovered Bitcoins goes down, so does the payoff for mining. When there are 1 million left undiscovered, it will be 1/9 as much earnings per hash value computed. This means people that got in early, earned 2x more bitcoins or more when the service was started. As the available Bitcoins drop, the more CPU power will be required to find these remaining coins.
Is bitcoin safe?
Bitcoin is the least safe currency I can imagine. Instead of having anti-fraud divisions of banks, there is no protection from fraud on the BTC network. It is extremely easy to get ripped off on the BTC network, and there is nobody to complain to but yourself. If your coins get stolen or scammed out of your possession, there is no getting them back as the Bitcoin network does not offer refund capability.
