Here’s how to tell if you understand bitcoin well enough to invest in bitcoin | David Moon – Knoxville News Sentinel

Here’s how to tell if you understand bitcoin well enough to invest in bitcoin | David Moon – Knoxville News Sentinel

Author and self-styled investment diva Kiana Danial was recently asked by a television interviewer about her expectations for bitcoin over the next 12 months. She replied, “I don’t give price predictions,” after which she predicted that the price would triple in the next year. Never let logical or linguistic consistency get in the way of a good story.

The price of bitcoin, the most well-known of cryptocurrencies, has almost doubled this year, attracting attention from both serious investors and Uber-driving bartenders.

What is bitcoin, and how does it work?

David Moon

No matter how painful or boring it might be, it is important to read the following paragraph.

Anyone can create cryptocurrency via a process called mining. When two parties engage in a transaction using bitcoin, cryptocurrency miners clump transactions together in “blocks” and add them to a public ledger called a blockchain. Before adding a new block to the public blockchain, however, a miner must validate the transactions so that the same bitcoin can’t be double spent. The validation process requires a miner to produce a 64-digit hexadecimal number, called a “hash,” that is less than or equal to a target hash. Producing a hash is done via computational trial-and-error, with computers guessing hashes millions of tarahashes per second. (A tarahash is 1 trillion hashes.) It currently requires approximately 21.7 trillion random hexadecimal guesses in order to mine a new block for the blockchain. The energy needed to run
Source…