So What Exactly Is a Bitcoin Anyway? Complete Breakdown of Bitcoin

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There is virtual money, then Bitcoin. Bitcoin super geek is a mathematically derived currency that promises to change the way people use money. Bitcoins are not real coins – they are locked code strings with military grade encryption – and the people who use them to buy and sell goods and services are difficult to trace. With anonymous drug traffickers, Ashton Kutcher and the Winklevoss twins are said to have jumped on the train. There is something to be said about the use of currencies which are not regulated by the government or the banks, do not come with the usual transaction fees and are impossible to counterfeit. Bitcoin also promises to be disaster-proof, because you cannot destroy numbers in the same way as you can destroy gold reserves or paper money.

What is Bitcoin?

Bitcoin is a digital currency created in 2009 by a developer hiding under the pseudonym Satoshi Nakamoto (supposedly a Japanese who has a perfect command of American English). Bitcoin is decentralized, which means it is not controlled by a central authority like a financial institution, a country, a government or an individual. It is peer-to-peer and open-source, distributed over the Internet from one computer to another, without intermediaries. Compared to the U.S. dollar, Bitcoin is practically untraceable, which makes it attractive to libertarians who are afraid of government and underworld interference. You can use it to pay for your online and offline purchases, from illegal drugs on the Silk Road to legitimate restaurant meals.

Where to get Bitcoins

You can get Bitcoins from your friends, gifts online or by buying them with real money on Bitcoin exchanges. However, using real money to buy Bitcoins goes against the goal of anonymity, as you may need to add your bank account to a third party site. You can also buy Bitcoins using your cell phone or through cash depositing institutions. New Bitcoins are created by "extraction". Mining is done automatically by computers or servers – this is not real-world mining where you have to dig underground to dig up goods, but the concept is similar. You have to make an effort to find gold, and you (or your machine) must also spend time and resources to verify and record Bitcoin transactions.

One of the most interesting things about Bitcoin is that it derives its value not from elements of the real world, but from codes. Bitcoins are removed from the ether by machines (and the people who run them) in exchange for solving complex mathematical problems related to the current number of Bitcoins. These bulky and expensive supercomputers have powerful encryption capabilities (and, it seems, don't consume electricity like no one's business). In a typical transaction, buyer A of location X pays seller B a few bitcoins online. The miners then rush to authenticate and encrypt the transaction, saving the Bitcoin codes on a central server. Whoever solves the puzzle first gets Bitcoins. About 25 new Bitcoins are created for each 10-minute block, but this number can increase or decrease depending on how long the network is in operation.

How to use Bitcoins

Once you get your hands on some Bitcoins, you need to store them in an online wallet via a computer program or a third-party website. You are part of the Bitcoin network once you have created your virtual wallet. To send Bitcoins to another user or pay for online purchases, get the identification number of this person / seller and transfer Bitcoins online. Processing takes approximately a few minutes to an hour, as Bitcoin miners around the world verify the transaction.

How to make money with Bitcoins

If you're still skeptical, a Bitcoin is currently worth around $ 90 (as of April 18, 2013), with hourly fluctuations that can make the day trader dizzy. As volatile as it is, more and more people are starting to milk the phenomenon for whatever it is worth, as long as it lasts. How to get your share of the virtual gold rush? Some ways: sell Bitcoin mining computers, sell your Bitcoins at crazy prices on eBay and speculate in the Bitcoin markets. You can also start the extraction. Anyone can mine Bitcoins, but unless you can afford an efficient configuration, it will take an ordinary PC a year or more to resolve the algorithms. Most people join pools of other miners who combine their computing power for faster code cracking.


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