Bitcoin is - simply put, a digital currency. The reason why we (and many others) think it is such a remarkable innovation is that this digital money is not controlled by any central authority. The Bitcoin network is completely decentralized, the currency itself is produced by a community, to which anyone can freely join. Bitcoin can be transferred almost freely and instantly in contrast to a bank transfer, where one must pay a significant amount of money and the completion might take days.
Bitcoin is not like the money we know, it is produced and held digitally. It is created by a network of computers that use a certain software, solving mathematical problems. There will be only a finite number of Bitcoins that can ever be mined, so inflation is not a problem of this currency.
An online payment with Bitcoin is fast, secure and as anonymous as you want it to be, and the number of goods and services for which you can pay with digital currencies is constantly growing as well.
Soon after the launch of Bitcoin other cryptocurrencies started appearing.
By now there are hundreds of new coins introduced to the market, which differ from Bitcoin in some or many characteristics. For example they can be mined with less effort than Bitcoin, and the number of coins that can be ever mined also varies in the case of each coin. The most important difference between altcoins and bitcoin is their proof of work algorithm. In the case of altcoins the algorithm does not contain the protocol of increasing difficulty, which means it’s easier and more rewarding for the individual to mine them than mining Bitcoin.
The success of a certain coin mostly depends on the strength of the community it creates. The altcoin that has the biggest market share after Bitcoin is Litecoin.
Bitcoin is created by the act of mining. The members of the network provide their computational power for calculations of mathematical problems, and for this effort they are rewarded with bitcoins. However, the more members are mining, the more competitive is gets. Computers are really good at solving these mathematical problems, so the Bitcoin Network purposely makes the solution more and more difficult, otherwise all of the bitcoins would be mined in a couple of minutes. This is why there are already many highly specialized hardware on the market, their only purpose being exclusively Bitcoin mining.
As new models come out quite frequently, everyone must regularly optimize their mining gear, in order to stay competitive. Once a new mining rig is introduced to the market, the old ones quickly become outdated and therefore unprofitable. At the same time this gradual development of the technology increases the overall difficulty of mining again. The result is a never ending circle of the constant need to optimize. This explains why it’s a must to start with the best available hardware and to start immediately in order to mine profitable for as long as possible as well as not to lose a minute of precious mining time.