All You Need to Know About Bitcoin

Bitcoin is often called “the Internet of money”. Similar to how the Web reshaped the publishing world, this digital currency is offering a breakthrough online alternative to the ubiquitous physical currencies. However, Bitcoin is as complex as it is intriguing; furthermore, it is a relatively new concept, having seen just over 8 years of use since its release in 2009. This leads to a variety of important questions. What exactly is Bitcoin? How does it function? Does it offer any advantages? What about the drawbacks?

This article will get you acquainted with the essence of Bitcoin, as well as the way this unorthodox cryptocurrency works. You will learn about the advantages you can take by making use of this innovative platform, the risks you need to be aware of before you make the first steps, and also how you can take advantage of our bitcoin colocation service for smooth and effective results.

What is Bitcoin?

Bitcoin is the first decentralized virtual cryptocurrency. To put it in simply, it consists of digital “coins” that exist only on and are sent via the Internet. These coins are transferred directly between people, without having to go through banks and clearinghouses in the process. This means Bitcoin is independent of central banking institutions and governments. The decentralized nature of Bitcoin gives it many advantages, which we will outline later on.

Just like your regular old U.S. dollar, a bitcoin’s value is relative to other currencies and goods. Its smallest unit is called the “satoshi” after the currency’s creator, Satoshi Nakamoto, and has a value of 0.00000001 bitcoin. This cryptocurrency has a finite supply, however: the maximum number of bitcoin units that can ever exist is 21 million. There are mechanisms in place to deal with this scarcity. For example, over time the rate at which bitcoins are produced slows down. You will learn more about this in the next section.

Today, businesses of all shapes and sizes are starting to accept bitcoins as payment. From pizza places to household names such as Expedia, Subway and Steam, Bitcoin is an appealing alternative to traditional currencies for both the Davids and the Goliaths of business. This is in no small part due to the rapid development of the new digital currency – to put things in perspective, in 2010 the equivalent of 10,000 bitcoins was $40. In May 2017, the same amount is worth little over $27 million. This has attracted even more serious interest in Bitcoin, resulting in a demand for dedicated space in data centers as bitcoin generation becomes too big for a home environment. An example of that is our very own Los Angeles colocation service, which can accommodate all your bitcoin processing needs. But what does this process actually entail?

Maths and Miners

The process behind creating bitcoins is seemingly very complicated – so much so that even leading economists have confessed their lack of understanding on the matter, or even worse, gone as far as calling it “evil”. Indeed, Bitcoin is hardly as simple a currency as the dollar bills in your wallet, but a great part of the complexity is related only to the tools that are used. Still, it’s a confusing thing to explain, so stick with us.

Like with physical currencies, bitcoins are stored in a wallet (digital, of course). The Bitcoin wallet is very much akin to online banking – you control everything transaction-related from there. That is about the only similarity between the two currencies. In order to make bitcoins, you need a “miner”. Miners started out as regular PCs in 2009 – today there is a wide variety of specialized machines with incredible outputs in bitcoin production. Bitcoin mining happens all the time, without interruption. Many people confuse it as the most important and only process in Bitcoin – while an indispensable part of this digital currency’s existence, mining simply means verifying the constant transactions between Bitcoin users and writing them into an extensive ledger of sorts, called the blockchain.

The blockchain gets a little bigger after every block of transactions added. An updated copy is available to everyone involved in the process, so that they can keep track of the transactions. In order to keep everything safe from fraud and other malicious actions, mining is introduced. This is where it gets complicated: miners take a newly created block of transactions and turn it into a “hash”. A hash, in the simplest of terms, is the new look of the transactions block after a mathematical formula has been applied to it. It consists of random letters and numbers in a sequence and cannot be tampered with in any way, since each block’s hash is made using the previous one. In short, bitcoin mining exists to automatically confirm that transactions are legitimate, one block at a time.

Of course, there is a reward at the end of every successful hash. This reward is in the form of bitcoins, which is where the competitive element of this cryptocurrency comes into play. In order to earn bitcoins, you need to invest in some serious hardware. It was not always like that, but Bitcoin has come a long way since 2009 and the process has to become more and more complicated as the blockchain increases in size. This, in turn, leads to a demand for not only faster, more reliable machines, but also a specialized environment that will protect them and ensure their flawless operation. An example of that is the recent major shift from home-run mining to using bitcoin colocation services such as the one we at QuadraNet provide.

Two Sides of Every Coin

Bitcoin has huge potential, but it is not perfect. There are both strong and weak elements that make this cryptocurrency what it is. Here is a list outlining the most important pros and cons of the platform:


  • Freedom and security. Bitcoin does not care about obstacles that affect traditional currencies. You are free to send and receive money anywhere, anytime. Furthermore, you are in charge of your own transactions, without any personal information being tied to them. This, along with backup and encryption mechanisms, ensures the safety of both your money and the network.
  • Open-source. The software behind Bitcoin can be accessed and reviewed by anyone, as can all the related processes. The result is full transparency of the transactions and even faster development of the platform. Naturally, only your public address is visible. Bitcoin protocols are not susceptible to manipulation due to their cryptographic protection.
  • Opportunities for everyone. Bitcoin’s biggest advantage by far is that it allows anyone to become an investor. Of course, you need to know what you are doing, but that is a prerequisite that can be applied for any money-making venture. More importantly, as the first decentralized digital currency in the world, Bitcoin opens many previously locked doors, especially to small businesses and freelancers.



  • The attached stigma. Bitcoin is hard to navigate if you are a newcomer. This puts off a great deal of potential users and leads to a pronounced lack of awareness and understanding. Even today, Bitcoin is associated by many with only drug deals and other shady practices. In reality, it offers so much more, but the fact remains that a great deal of people are still unaware of digital currencies in general, and the message is often lost in translation.
  • Touch-and-go. A big risk related to Bitcoin is the platform’s extremely volatile nature. As mentioned earlier, there is a limited amount of coins available – 21 million. This scarcity, combined with the ever-increasing demand, makes spikes in bitcoin prices a daily occurrence. Though the situation is expected to smooth out with time, currently it is still relatively risky to use Bitcoin, especially if you are inexperienced.
  • Extensive research required. You cannot just dive into Bitcoin without doing your homework first. New users need to have solid preparation and advanced knowledge of the processes in order to better understand the situation. A significant factor is the hardware and cooling you possess, but equally as important is ensuring constant mining uptime, which is often unattainable in a home setting.


Make the Most out of Bitcoin

In conclusion, we will surely be seeing a lot more from Bitcoin in the future. There is one factor that can be considered as both an advantage and a disadvantage – Bitcoin is still in its infancy. Many aspects of this virtual currency are still in development, including new features, tools and services that will contribute towards the platform’s stronger security and wider accessibility. While it still has a lot of work to do, Bitcoin has already earned the right to be called “the Internet of money”.

Bitcoin certainly has the potential to lead the digital currency revolution. At QuadraNet, we embrace breakthrough ideas and solid concepts that have the power to change the world as we know it. We always strive to provide the latest and best in Internet-based products and services to all customers, which is why we are happy to offer you our excellent bitcoin colocation solutions, combining top quality at the lowest cost for all your mining needs. All of our colocation plans include a port speed of 100Mbps in a premium performance-oriented network, as well as guaranteed 100% Power Uptime SLA and 99.999% Network SLA. With our Los Angeles datacenter, your bitcoin mining hardware is in the hands of capable and passionate professionals.