Bitcoin is a decentralized cryptocurrency that uses peer-to-peer technology to facilitate instant payments. Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.
The value of a single bitcoin fluctuates depending on demand and supply. When demand for bitcoins increases, the price increases.
When demand falls, the price falls. The rate at which bitcoins are created is called the hash rate.
The hash rate is the number of times a given piece of data can be hashed in a given period of time. The higher the hash rate, the more difficult it is to create new bitcoins.
This difficulty is what ensures that there will only ever be 21 million bitcoins in existence.
The hash rate can be affected by a number of factors, including the total amount of computing power dedicated to mining, the efficiency of the miners themselves, and the difficulty of the mining algorithm.
As more people mine for bitcoins, the hash rate increases. This has the effect of making it more difficult to create new bitcoins, and also serves to increase the value of each bitcoin as it becomes more scarce.
The total amount of computing power dedicated to mining also affects the hash rate. If more people are mining with faster computers, the hash rate will increase.
If fewer people are mining or if they are using slower computers, the hash rate will decrease.
The efficiency of miners can also affect the hash rate. If miners are using more efficient hardware or software, they will be able to generate more hashes per second than less efficient miners.
This will increase the overall hash rate even if the total amount of computing power remains constant.
Finally, the difficulty of the mining algorithm can have an effect on the hash rate. If the algorithm is changed to be more difficult, it will take longer to generate each bitcoin and thus the hash rate will decrease.
If it is changed to be easier, it will take less time and thus the hash rate will increase.