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7 things you need to know about Bitcoin

Alex Wawro | April 12, 2013
Bitcoin is booming, but don't buy the hype before you read our guide.

Nobody knows who really created Bitcoin

Bitcoin's creator was a coder and cryptography enthusiast who communicated on the cryptography mailing list under the name Satoshi Nakamoto. Nakamoto designed the network and launched Bitcoin in June of 2009, mining the first 50 bitcoins to form what became known as the genesis block.

Nakamoto disappeared shortly thereafter. Many reporters have tried--and failed--to unearth Nakamoto's true identity, but so far the progenitor of the most successful virtual currency ever made remains a mystery.

Bitcoins aren't the first virtual currency, and they won't be the last

Bitcoin would appear to be the most successful virtual currency we've ever seen, but it's not the first. From e-gold to Beenz to Facebook Credits, people have been trying--unsuccessfully--to build viable virtual currencies for more than a decade.

These has-been virtual currencies failed for different reasons. Some were shut down by the government authorities on charges of money laundering. Some were shut down by their owners at the culmination of elaborate scams. And some petered out when people stopped buying them. Because Bitcoin is decentralized, it can't be shut down by anyone. Yes, individual Bitcoin exchanges can be targeted by financial regulators--but since nobody runs Bitcoin, it can only peter out from lack of interest.

A hacker could theoretically destroy the Bitcoin network by tampering with the code in an exploit to end all exploits. However, in the four years since its inception, the Bitcoin code remains uncompromised. Individual users and exchanges may be hacked, but the bitcoins themselves have so far proved unassailable.

That's probably why a number of Bitcoin clones are poised to enter the market. From TerraCoin to Ripple to PPCoin, plenty of virtual currencies based on the open-source Bitcoin code are eager to compete for your real-world money. For now, it's probably a good idea for most consumers to keep a safe distance from virtual currency: The wild fluctuations in value that make bitcoins so interesting to study could make you a millionaire one day, and a pauper the next.

 

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