What is BitCoin?
What is BitCoin?
Bitcoin is a type of virtual currency that continues to be very popular. It has a solid foundation and it isn’t going to be just a passing trend. In fact, many experts believe it will be one of the main ways to complete transactions between two individuals in time. It will reduce the need for 3rd parties to be involved in those types of transactions.
When you think about Bitcoin, think about the Gold Standard currency in the United States. Bitcoins are virtually currency that is directly associated with business conducted on the World Wide Web. It is considered to be the first free market for global currency that isn’t centralized.
Bitcoins can be exchanged for:
a) Goods
b) Services
c) Other Currencies
A Bitcoin wallet has to be installed on your computer or smartphone before you can begin. There are private key codes that prevent the Bitcoin from being obstructed as it is passed from one individual to the next.
A common question that people is ask is where do Bitcoins generate from? They are created through an open source mining system on computers. The system used is one very similar to those used for lottery programs. The 64-byte code has to be deciphered by your computer.
The process of mining Bitcoins is actually what generates their value. The process of mining allows for the currency value to be generated. Exchanging Bitcoins through various currencies is the key to making money. The two main currencies used are:
a) United States Dollar (USD)
b) Euro
There are in depth mathematical computations that are involved with creating Bitcoins. This allows them to be self-contained for their value. They can be traded, purchased, and sold. Think about a bag full of gold coins sitting on your desk. You can sell them, get more of them, anything you want. The difference is that Bitcoins are virtual rather than tangible.
The data ledger of a Bitcoin takes up very little space on a computer. It takes about the same amount of space as a text message on a mobile phone. The digital file of a Bitcoin has the identity address and the history of who has owned it. All of the data pertaining to buying and selling for that Bitcoin is recorded.
The private key header is where the complex digital signature is kept. This is what verifies all of the transactions for any given Bitcoin. The digital signature is a unique way to identify the owner.
All of the tags for any Bitcoin transaction can be publicly disclosed. The digital signature prevents them from being duplicated or stole so fraud isn’t a concern with Bitcoins.
The mining process is in place to make sure the encryptions remain secure. The complex match and cryptic characters make it very difficult for them to be duplicated or fraud to occur. Once a math equation is solved, a block is created. It takes about 10 minutes for a block to be successfully solved.
A block chain occurs when there are transfers of the Bitcoin. As a result, there is always an ongoing record of it. Every single Bitcoin transaction that has ever occurred is public record.
The owner of a Bitcoin can decide where they would like to store it. The most common places include:
a) Armory
b) Blockchain.info
c) Bitcoin.org
There is no central authority in place when it comes to Bitcoins. This means that transactions can be completed without sharing your name or other personal details with the retailer. It adds a new level of anonymity for the consumer.
This doesn’t mean that you don’t have to report income to the IRS though through Bitcoins. It also doesn’t give you the freedom to use them to buy or sell illegal items online. It simply gives you the chance to have opportunities without locking in your personal details that are tied to a given transaction.
Many retailers online have a rule that your debit or credit card purchase has to be at least $10. If it is less, they either won’t accept it or they will charge you that minimum fee. That isn’t the case though when you use Bitcoins. There is no minimum amount and there is no maximum transaction amount either.
That can be helpful if you are taking part in a transaction that is more than your daily allowed limit on a credit or debit card. Such limits are in place for your protection. Yet they can make it frustrating when you try to complete any online purchase that is for more than that given amount.
You will need to download the Bitcoin software to get started. It doesn’t take much time to download, and the application is free. It can be downloaded to your computer or smartphone. Most people choose to download it to both so that they can always have access to their Bitcoin information from any location.
Validation is a big part of what makes Bitcoin safe. This is a complex part of the program that takes place in the background. It makes fraud very unlikely because it takes more time to create the Bitcoins through mining than the value that the frauder would get from it. This isn’t the case when someone is able to grab your bank account information or credit card details and use them for online purchases.
There is an ongoing transaction history too of Bitcoins from the moment they are created. That also helps to deter fraud from taking place. With the scenario of a bank account or credit card, charges can be made and completed before the consumer is even aware that they have taken place.
Bitcoin is an online medium of exchange that does have value. The fact that the number of Bitcoins to be created are limited helps to prevent problems with inflation. Once that maximum number is created, no more will be made. It isn’t like paper money or other currencies where an unlimited amount of it can be created over time.
Disclaimer: Please refer to our disclaimer and seek your own financial advisors on any investments. All information here is intended for educational purposes only.