You’ve all heard of Euros, Pesos, Rubles, Rupees, and of course Dollars. But have you heard of the newly created digital currency called Bitcoin?
Bitcoin is a decentralized (not created by any one government) peer-to-peer, electronic currency that only exists online. There is no central body controlling the Bitcoin network, and it's managed and regulated by its users.
It can be used as a medium of exchange for purchasing goods or services, just like we do with dollars. The basic idea is that you can use it to pay for things without a third-party broker, like a bank or government. Since no government’s central bank sets the value of value of bitcoins, its value is whatever people are willing to pay or receive for them. As of the writing of this article, each bitcoin is worth about $442.00, but you can check on http://preev.com/ for the current dollar value of bitcoins.
When you pay for something with bitcoins or get paid, your transaction is recorded on a public ledger, called a ‘Blockchain’. The blockchain is a public record of all transactions in the Bitcoin network, with the ledger maintained by everyone who uses it.
People can send bitcoins to each other using mobile apps or their computers. It’s similar to sending cash digitally. If someone wants to buy or sell bitcoins, several marketplaces called “Bitcoin Exchanges” allow people to buy or sell bitcoins using currencies from anywhere in the world.
Bitcoin are stored in a “digital wallet,” which exists either in the cloud or on a user’s computer. The wallet is a kind of virtual bank account that allows users to send or receive bitcoins, pay for goods or save their money. Once bitcoins are placed in your digital wallet, you have an encrypted ‘private key’ to access them. If you lose that key, you’ve lost your bitcoins. Also, unlike bank accounts, Bitcoin wallets are not insured by the FDIC.
One of the differences between using bitcoins and using regular money online is that bitcoins can be used without having to link any sort of real-world identity to it. Unless someone chooses to link their name to a Bitcoin address, it is hard to tell who owns the address. Bitcoin does not keep track of users; it keeps track of addresses where the money is.
Bitcoin Mining is the process of adding current Bitcoin transaction records, called Blocks, to Bitcoin's public ledger of past transactions, called the block chain. The block chain confirms transactions to the rest of the network as having taken place. Mining is also the mechanism used to add bitcoins into the system: Miners are paid any transaction fees as well as a "subsidy" of newly created bitcoins. This both serves the purpose of introducing new coins as well as motivating people to provide security for the system. . The number of bitcoins in existence will never exceed 21 million. To see how many bitcoins are in circulation and watch live transactions, go to: https://blockchain.info/charts/total-Bitcoins