OK, so what’s Bitcoin?
It’s not a real coin, it’s “cryptocurrency, ” a digital form of payment that is produced (“mined”) by lots of people worldwide. It enables peer-to-peer transactions instantly, worldwide, at no cost or at very low cost.
Bitcoin was invented after decades associated with research into cryptography by software developer, Satoshi Nakamoto (believed to be a pseudonym), who designed the formula and introduced it in 2009. Their true identity remains a mystery.
This currency is not backed by a tangible commodity (such as precious metal or silver); bitcoins are exchanged online which makes them a commodity in themselves.
Bitcoin is an open-source product, accessible by anyone who is really an user. All you need is an email address, Access to the internet, and money to get started.
Where will it come from?
Bitcoin is mined on the distributed computer network of customers running specialized software; the network solves certain mathematical proofs, and searches for a particular data sequence (“block”) that produces a particular pattern when the BTC algorithm is applied to it. A match produces a bitcoin. It’s complex and time- and energy-consuming.
Only 21 million bitcoins are ever to be mined (about 11 million are currently in circulation). The math problems the network computers solve get progressively harder to keep the mining operations and provide in check.
This network also validates all the transactions through cryptography.
How does Bitcoin work?
Internet users transfer digital assets (bits) to each other on a network. There is no online bank; rather, Bitcoin has been described as an Internet-wide distributed ledger.
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Users buy Bitcoin along with cash or by selling an item or service for Bitcoin. Bitcoin wallets store and use this digital currency. Users may sell out of the virtual ledger by trading their Bitcoin to someone else who wants in. Anyone can do this, anywhere in the world.
You will find smartphone apps for conducting cellular Bitcoin transactions and Bitcoin exchanges are populating the Internet.
How is Bitcoin valued?
Bitcoin is not held or even controlled by a financial institution; it is totally decentralized. Unlike real-world money this cannot be devalued by governments or banks.
Instead, Bitcoin’s value is situated simply in its acceptance between customers as a form of payment and because its supply is finite. Its global currency values fluctuate according to provide and demand and market speculation; as more people create wallets and hold and spend bitcoins, and much more businesses accept it, Bitcoin’s worth will rise. Banks are now trying to value Bitcoin and some investment websites predict the price of a bitcoin is going to be several thousand dollars in 2014.
What are its benefits?
There are benefits to consumers and merchants that want to use this payment option.
1 . Fast transactions – Bitcoin is transferred instantly over the Internet.
2 . No fees/low fees — Unlike credit cards, Bitcoin can be used for free or very low costs. Without the centralized institution as middle man, there are no authorizations (and fees) required. This improves income sales.
3. Eliminates fraud risk -Only the Bitcoin owner may send payment to the intended recipient, who is the only one who can receive this. The network knows the move has occurred and transactions are usually validated; they cannot be challenged or taken back. This is big to get online merchants who are often susceptible to credit card processors’ assessments of whether a transaction is fraudulent, or businesses that pay the high price of credit card chargebacks.
4. Data is safe — As we have seen with latest hacks on national retailers’ transaction processing systems, the Internet is not constantly a secure place for private data. With Bitcoin, users never give up private information.
a. They have 2 keys – a public essential that serves as the bitcoin address and a private key with private data.
b. Transactions are “signed” digitally by combining the public plus private keys; a mathematical functionality is applied and a certificate is generated proving the user initiated the transaction. Digital signatures are distinctive to each transaction and cannot be re-used.