What is Bitcoin?
So you are interested about Bitcoin and want to know it better? You’ve come to the right place! Bitcoin is an online currency. It’s a digital decentralized alternative to real currencies like Dollar and Euro. Sounds complicated? Well don’t worry, in this article, we’ll try to explain it as simply as possible. You can also check out our Bitcoin Q&A section for more answers. Or if you want to learn more about how much Bitcoin you can make by mining, you can use our Bitcoin Calculator.
A little history
Satoshi Nakamoto (a mysterious pseudonymous developer) first described Bitcoin as a new type of digital currency in a 2008 paper. He released the first Bitcoin software in January 2009, under open source MIT license. Since then, Bitcoin has rapidly grown into a widely known online currency and its value increased dramatically.
Bitcoin is an online digital currency
Bitcoin is not actually a physical coin, certainly you have figured that out by yourself! Bitcoin is a complete digital currency traded or exchanged online. You can use it just like a real currency like Dollar to pay for some goods or service. But unlike the dollar, and like all digital currencies, it has no physical form and it only exists electronically.
Unlike most online digital currencies or real physical currencies, Bitcoin is completely anonymous. It has no serial number like real currencies and Bitcoin network never asks for or collect any personal information. There is no possible mechanism that can be used to trace a Bitcoin transaction back to the buyer or seller. This anonymous characteristic of Bitcoin makes it very popular among privacy concerned people around the world.
Bitcoin has no central authority
You heard that right! Seriously! Bitcoin has no central authority like Federal reserve or central banks. So no single person or organization has the authority to control it or manipulate it (except the software development team who works on improving Bitcoin software). Bitcoin is a truly independent currency, backed by no one, which makes it completely unregulated. Without a central authority, the potential of Bitcoin growth is limitless.
Using Bitcoins to shop
Bitcoin is not that popular compared to real currency, but its popularity is growing rapidly and more and more online stores are accepting Bitcoin as a payment for their service or goods. Today, you can buy Computer hardware or pay for Web-hosting or domains using Bitcoin as an example. And its all completely anonymous which is a prime reason behind Bitcoin’s popularity.
Bitcoin inventor Satoshi Nakamoto dreamed of dominating the global currency market. Bitcoin is still very very far from that goal, and there is no certainty if it will ever go there. But right now, Bitcoin is an established online currency, attracting more users everyday and so more shops are accepting it. At this rate, Bitcoin can certainly become a major force in the currency world.
With the increasing demand of Bitcoins, its not just another currency sitting idle in your digital purse, it has the potential of becoming an excellent investment with greater risk:reward ratio!
Bitcoin is User Generated
It’s true! Bitcoin can be generated … out of nothing. Sounds weird? It sure does, but it’s actually very logical. You already know that there is no central authority, so who keeps track of its transactions? Or who process the entire system? Bitcoin network is an open source P2P network where every user has access to its transaction data. Bitcoin users help to process and verify this data by providing computing power, and get rewarded with new Bitcoins for their contribution. It’s a process called Bitcoin mining. Bitcoin system has a limit for maximum 21 million Bitcoins, so with every new Bitcoin generated, it becomes harder to generate the next one, which slows down the generation process and availability.
This is the fundamental reason for Bitcoin’s price skyrocketing. The most basic rule of economy is, if supply is lower than demand, prices will increase. As mining new Bitcoins becomes harder, but demand keeps increasing with new users, Bitcoin price keeps increasing naturally.
That’s right! You are free to convert your Bitcoin back into a real currency like Dollar or Euro anytime. There are many popular exchanging services (like MT. Gox) that will allow you to convert your Bitcoins to other digital currency or real currency 24/7 according to the current exchange rate. And right now, the rate is rapidly increasing! Which makes Bitcoin a popular choice for currency trading, for either short and long term investments.
Bitcoin is P2P exchanged
P2P means peer to peer, simply one point to another “directly”. We already know that Bitcoin has no central authority, which means no one is there to control it or monitor it. Bitcoin is exchanged directly to one person to another through Bitcoin network. So that leaves the possibility of any kind of interference by a 3rd party. In other words, Bitcoin transactions are very secure and fast because of its P2P nature.