What Is Bitcoin?
Bitcoin is a form of digital currency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people, and increasingly businesses, running computers all around the world, using software that solves mathematical problems.
It’s the first example of a growing category of money known as cryptocurrency.
What makes it different from normal currencies?
Bitcoin can be used to buy things electronically. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally.
However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the bitcoin network. This puts some people at ease, because it means that a large bank can’t control their money.
Who created it?
A software developer called Satoshi Nakamoto proposed bitcoin, which was an electronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.
Who prints it?
No one. This currency isn’t physically printed in the shadows by a central bank, unaccountable to the population, and making its own rules. Those banks can simply produce more money to cover the national debt, thus devaluing their currency.
Instead, bitcoin is created digitally, by a community of people that anyone can join. Bitcoins are ‘mined’, using computing power in a distributed network.
This network also processes transactions made with the virtual currency, effectively making bitcoin its own payment network.
So you can’t pump out unlimited bitcoins?
That’s right. The bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after the founder of bitcoin).
What is bitcoin based on?
Conventional currency has been based on gold or silver. Theoretically, you knew that if you handed over a dollar at the bank, you could get some gold back (although this didn’t actually work in practice). But bitcoin isn’t based on gold; it’s based on mathematics.
Around the world, people are using software programs that follow a mathematical formula to produce bitcoins. The mathematical formula is freely available, so that anyone can check it.
The software is also open source, meaning that anyone can look at it to make sure that it does what it is supposed to.
What are its characteristics?
Bitcoin has several important features that set it apart from government-backed currencies.
1. It’s decentralized
The bitcoin network isn’t controlled by one central authority. Every machine that mines bitcoin and processes transactions makes up a part of the network, and the machines work together. That means that, in theory, one central authority can’t tinker with monetary policy and cause a meltdown – or simply decide to take people’s bitcoins away from them, as the Central European Bank decided to do in Cyprus in early 2013. And if some part of the network goes offline for some reason, the money keeps on flowing.
2. It’s easy to set up
Conventional banks make you jump through hoops simply to open a bank account. Setting up merchant accounts for payment is another Kafkaesque task, beset by bureaucracy. However, you can set up a bitcoin address in seconds, no questions asked, and with no fees payable.
3. It’s anonymous
Well, kind of. Users can hold multiple bitcoin addresses, and they aren’t linked to names, addresses, or other personally identifying information. However…
4. It’s completely transparent
…bitcoin stores details of every single transaction that ever happened in the network in a huge version of a general ledger, called the blockchain. The blockchain tells all.
If you have a publicly used bitcoin address, anyone can tell how many bitcoins are stored at that address. They just don’t know that it’s yours.
There are measures that people can take to make their activities more opaque on the bitcoin network, though, such as not using the same bitcoin addresses consistently, and not transferring lots of bitcoin to a single address.
5. Transaction fees are miniscule
Your bank may charge you a £10 fee for international transfers. Bitcoin doesn’t.
6. It’s fast
You can send money anywhere and it will arrive minutes later, as soon as the bitcoin network processes the payment.
7. It’s non-repudiable
When your bitcoins are sent, there’s no getting them back, unless the recipient returns them to you. They’re gone forever.
So, bitcoin has a lot going for it, in theory. But how does it work, in practice? Will other cryptocurrencies, ICO’s or blockchain technology replace it? Unfortunately, we don’t know the answer to that.
We can however state with some degree of confidence that blockchain technology probably isn’t going anywhere, and very possibly could be presenting those early to the party a once in a lifetime opportunity. With any investment, especially cryptocurrency.. do your due diligence and never invest more than you can afford to lose. Also make sure you know how to purchase safely and store securely offline to prevent theft.
How Does This Apply To Online Gambling with Bitcoin?
Provably Fair: a Bitcoin feature that makes online gambling transparent
Provably Fair technology is unique to bitcoin gambling and adds to the transparency of bitcoin online casino by verifying bet outcomes were correct and fair.
The system is based on the fact that bitcoin uses a cryptographic algorithm using hash functions, which are very difficult to decode or break.
What is Provably Fair Gambling?
Open Algorithms are used by online gambling operators, in the form of Random Number Generators, Hashing or Random Seed Generation to verify each transaction that takes place on its site. Each game or transaction has its own algorithm for checking its particular fairness.
Blockchain platforms are 100% transparent and immutable. Purchases and pay outs are open to all on public ledger which cannot be tampered with. A program code can oversee the entire process, and zero human interference is involved. The specifics of how the system work are quite interesting.
How Does Provability Work
The application of Provably Fair systems may vary a little bit from game to game but the principle is the same for all single player games. Multiplayer games like poker are a little more complicated. The key to the Provably Fair system is that it uses a cryptographic hash which is considered unbreakable for practical purposes. This ensures that the information sent to the player and casino is unknown and can be deciphered. The way this happens is:
- The casino creates a seed number for the bet
- This is hashed and sent to the player
- The player adds a seed and the bet plays out
- At the end of the bet the player receives the seed used in the bet
- If it matches the bet is verified. No interference occurred!
- If the casino tried to manipulate the bet in any way the hash function would be changed and the bet would not be verified. For the first time in gambling history a bet pay out can be verified by a player in real time!
How is it Used by Both Casino and Player to Ensure Fairness?
Checking underlying fairness involves verifying that each game works as advertised and that there are no errors leaving room for unfair play. An online casino issues a seed number or randomly generated number to the player which is hashed or encrypted. This is suitably buffered to ensure the same hash doesn’t reoccur. Once a player has finished a transaction or game, they can use these seeds to prove fairness. The player will do this by using the algorithm, hashes, and seeds as well as the events of the transaction to check that the outcome is indeed Provably Fair.
If something has transpired which is not fair, the seeds at the end of the game won’t match, and this will prove the outcome to be unfair. This process can also be carried out on blockchains other than Bitcoin’s.
Which Other Cryptocurrencies are Involved in Provably Fair Gambling?
The expansion with the creation of more cryptocurrencies which are becoming significant for gambling has opened the door for Provably Fair gambling to move onto other blockchains. Etherium, Dogecoin, Litecoin and many more have become platforms for Provably Fair gambling as well. Nevertheless, it is important to remember that Provably Fair gambling is a blockchain-based feature.
Provably Fair Gambling, which came about through Bitcoin’s blockchain for the first time in history, has presented us with gambling that is 100% transparent and secure. This gives players peace of mind that there are no background manipulations taking place and that the outcomes of the games they play are verifiably random. Inevitably this will draw more players to cryptocurrency gambling.
How Do I Buy Bitcoin?