Bitcoin is a digital currency that was created in 2008. It has since grown to be used by millions of people around the world. Just like any other traditional currency, like the U.S dollar or the Euro, bitcoin can be used as a form of payment. But unlike traditional currencies bitcoin is not backed or controlled by any single government, organization or company. No single entity controls bitcoin. There is no 3rd party or intermediary involved when transacting in bitcoin.
Why is bitcoin different from traditional currencies?
With a traditional currency, all transactions are recorded on a private central ledge. These ledgers are often controlled by banks. Bitcoin transactions are also recorded on a ledger. The key different between bitcoin’s ledger and a traditional currency’s ledger is that no single entity controls bitcoin’s ledger. Instead bitcoin’s ledger exists on thousands of computers all around the world. When a bitcoin transaction occurs, all the ledgers on the network are updated at the same time and all transactions are publicly viewable. There’s a special name for bitcoin’s ledger. It’s called the blockchain.
What makes bitcoin secure?
The blockchain is what makes bitcoin possible. A network of thousands of computers around the world run special software that help secure bitcoin’s blockchain. Anyone with a computer can run this software. The software is open source and anyone can review the code.
This network of computers helps ensure that the same bitcoin isn’t spent twice and that all bitcoin wallet balances and transactions are legitimate. Computers that run this software are called “miners”. In exchange for verifying bitcoin transactions, miners are rewarded with newly created bitcoin. Once transactions are verified by the miners, they are posted and updated in all copies of the bitcoin ledger throughout the world.
How do I get bitcoins?
Bitcoins can be acquired through a bitcoin exchange. Numerous exchanges exist throughout the world. One of the most popular ones is coinbase.com. From a bitcoin exchange, you can exchange your traditional money, like U.S dollars, for bitcoin. Your bitcoins are then stored in a wallet. You can think of a wallet like a bank account. You can store, send and receive bitcoins using a wallet.
You can download bitcoin wallet software on your computer or mobile device. There are many wallets to choose from but, it’s important to take proper precautions to backup and secure your wallet. You control your bitcoin wallet 100%. If you loose the computer or device with the wallet and you don’t have any backups, you loose all your bitcoin. If you don’t want to manage your own bitcoin wallet or find the process too technical, you can use a hosted wallet. A hosted wallet is one that is managed and hosted by a 3rd party. You simply log into your wallet, from any computer or phone, to access your bitcoin wallet. Some trusted hosted wallets include coinbase.com or blockchain.info.
What does it cost to use bitcoin?
A transaction in bitcoin happens almost instantly and with minimal fees. The use of most bitcoin wallets is free. When you purchase or sell bitcoins on a bitcoin exchange, the exchange may take a small transaction fee. All things considered, bitcoin is much faster and much cheaper to use than a traditional currency.