BitCoins are... the first successful attempt at a large scale decentralized digital currency. There are other digital currencies in existence - Gamers on Second Life pay with Linden dollars, you can buy credits on facebook and such. Bitcoins however, represent the first truly decentralized currency - it's neither created or administered by a central authority such as a company or central bank. As such, bitcoin is designed to be free from politcal agenda or interference and it's value soley determined by market forces. And hence, liberate us all from the tyranny of those evil politicians and bankers etc etc
So far not bad. There seems to be some bias in your description, but the basic facts (decentralized, no central authority, digital currency) seem to be there.
At it's essence, a bitcoin is a bunch of code.
I'm not sure what you mean by this. Certainly the peers are all running computer code to communicate with each other and enforce the protocol, but the "bitcoins" themselves don't even exist, what exists is a chain of signatures transferring value from one address to another, starting with an initial assigning of value to an address (or addresses) each time a block is "solved".
There's nothing tangible about a bitcoin,
True.
it's made of bits...lots and lots of bits. These bits create a digital signature which represents a value of x number of bitcoins awarded to a unique walletID.
There is no signature in the initial "awarding" of bitcoins to an address, the signatures are only used to assign that value to new addresses each time the value is "spent". Note, that a wallet can have multiple addresses, whereas your description of a "unique walletID" makes it sound like each wallet can have only one ID.
The number of bitcoins you have is registered on a virtual ledger
Not bad for a simplified understanding. Technically, every transaction that has ever occurred in bitcoin is registered in the virtual ledger. The number of bitcoins you "have" is calculated by your wallet. Your wallet does this by having a list of addresses that the wallet has control over, and scanning the entire history of transactions to find the unspent outputs associated with any of those addresses. Then the wallet adds up all the value assigned in each of those unspent outputs.
- a large and at present 6GB file, referred to as a blockchain which every user edits and updates on a peer to peer basis
The last I heard I thought it had exceeded 8 GB, but I haven't checked on that. Perhaps you're right and it is only 6GB?
And this is part of the genius of BitCoin - there is no central server that holds and maintains this ledger - it's help and updated by every BitCoin user and that lack of centrality guarantees it's impartiality.
And combined with the "proof-of-work" provides a decentralized method for the entire network of peers to come to a consensus agreement on the order of transactions and a way to make them "permanent".
Bitcoins were designed to release a set amount of coins to the public each year. In fact the total number of bitcoins ever to be released has already been pre-determined - 21 million coins
Actually just a bit less than 20,999,999.97690000 coins, but for the sake of explanation, it's probably ok to round up to 21 million.
released over a 20 year period.
Nope. They'll be released over a 131 year period. Although the amount will be over 20.3 million within the first 20 year period.
The release of these coins is not designed to be linear, and the quanitity released reduces with each successive year.
Nope. The quantity is reduced approximately every 4 years. (exactly every 210,000 blocks, with an average of approximately 6 blocks per hour).
For example, currently 25 bit coins are created every 10 minutes, in November of 2012 it was 50 bit coins every 10 mins.
Yes. It was 50 bitcoins every 10 minutes on average from early 2009 through late 2012. It will be 25 bitcoins every 10 minutes on average from late 2012 through sometime in 2016.
The graph below shows you the release pattern.
No graph presented in your post here.
At present there is over 11 million bitcoins in 'circulation'
Yes.
Bitcoins are awarded by processing various blocks of data from the blockchain.
Awkwardly stated, but I don't see anything specifically wrong with that.
Every time a transaction is made around the world the blockchain requires updating
Actually the blockchain gets updated even if there are no transactions. (Well technically, the act of adding a block to the blockchain creates at least one transaction paying the block reward to the miner, or pool, that "solves" the block)
- and BitCoin is ingenious in that it awards more Bitcoins for every block of data that is updated. Thus ensuring a self sustaining cycle of maintenance and reward.
And pays any transaction fees to the miner as well. That way as the block subsidy is reduced over time, the miners have a financial incentive to continue creating new blocks.
So all you gotta do is get your PC to do some processing and you'll get a bunch of bitcoins, right?..... kinda.The difficulty of solving the blockchain also increases relative to the amount of processing that's being performed on the blockchain. The solution to this has been to pool processing resources to collectively handle the mining of the block chain and share out the spoils among those who contributed.
Glosses over a lot of details, but its a good introduction to the concept of mining and pool operations.
