What is bitcoin?Bitcoin is a type of digital currency. No one person or government controls it. Bitcoins are not a physical form of currency. You can not hold or even touch a Bitcoin. Bitcoins are produced by miners, hardware designed specifically for solving complex algorithms. Bitcoin is the first example of a new category of currency known as cryptocurrency.
Why is it different from other currencies?
Bitcoin can be used at a growing number of businesses and can be used to buy almost anything. Large corporations and individuals alike are intrigued by the concept of Bitcoin because no central bank controls it. It is a decentralized form of currency.
Where did Bitcoin come from?
Rumors are that a software developer named Satoshi Nakamoto developed the idea for an electronic payment system that is based on mathematical proof and not controlled by any one government or entity. His idea was to have a completely electronic almost instant form of payment.
How are Bitcoins created?
Bitcoins are created digitally with hardware called miners. These miners are created and controlled by software whose only purpose is to solve complex algorithms. The algorithms, individually, are transactions between other people buying and selling using Bitcoin. The miners then solve the algorithm to verify the transaction.
When a miner finds the block that needs to be verified and then verifies the transaction, that miner is awarded Bitcoin for their effort. At this time it’s 25 Bitcoins awarded to the miner who verifies the transaction. The value of Bitcoin as I’m writing this is $417.87. So if you were lucky enough to own the miner who found the block that needed to be verified you would earn $10,446.75 for verifying that block.
One of the reasons Bitcoin are so valuable is because they are programmed to only create 21 million Bitcoins, ever. This means that as more Bitcoins are issued the more valuable they will become. Unlike common currency which can be printed to make more.
What are the other features of Bitcoin?
Every transaction since the creation of Bitcoin is kept in a completely transparent ledger that anyone can see known as the Blockchain. It’s this transparency that is a main feature of Bitcoin and assures that the transaction that is taking place is true and not fraudulent.
Secondly, Bitcoin is completely anonymous. When you create a Bitcoin wallet you are give a long random string of digits that creates your Bitcoin wallet address. This is the address you give to someone so they can send you Bitcoins.
When you make a purchase with Bitcoin the payment is instant. Most times you can see it within seconds. The only delay when you send or receive Bitcoins is when you are waiting for the miners around the world to confirm your transaction. Depending on how busy the Bitcoin network is depends on how fast your transaction is confirmed. Your transaction will be verified between 5 minutes up to 2-3 hours so you need to be patient.
When you send Bitcoin to someone you will pay a transaction fee. This fee is paid to the miners as a bonus and is usually around 0.00005000 BTC which is about $0.021
When you send Bitcoins to someone you need to remember that there are no refunds. You can’t call someone to dispute a transaction. There is no one to call. The only way you will get your coins back is if the recipient is willing to send them back to you.
All in all Bitcoin has a lot going for it. Since big corporations have started to accept Bitcoin as a form of payment proves that it’s not likely to disappear anytime soon. If you want to read about how Bitcoins are mined or what happens when a transaction occours and how the network is maintained.
If you would like to find out more about the types of altcoins available for mining check out our post about the Types of Cryptocurrency and Altcoins