what are bitcoins

What Are Bitcoins?

Bitcoin currency has received great publicity in the last few months. Bitcoins are mainly used as means of online payment. People often have the misconception that Bitcoin requires the use of special technical knowledge. Bitcoins are, however, relatively easy to use, as long as you realize some of the basics. These “coins” are created using the computers computational power and the users will get bitcoins in exchange.

What is Bitcoin?

Bitcoin is a decentralized monetary system. Behind it is not a company, but it is an open community, which develops Bitcoin software together. You can begin to use bitcoins either by installing bitcoin wallet on your computer or mobile phone or use the Internet-based wallets. You can quickly and securely trade bitcoins with other people around the world with your local currency using bitcoin exchange services.

This Is Known As Bitcoin Mining

Bitcoins are created in accordance with a predetermined formula. 25 new bitcoins are generated in every 10 minutes. Every four years, the number of new bitcoins automatically will be halved and thereby eventually reach the maximum number of Bitcoin, which is 21 million.

Bitcoin is most commonly used in such a way that you download on your computer or cell phone a Bitcoin wallet, after which you can send and receive bitcoins. To send the bitcoins you first need to acquire them for example by buying or mining.

To obtain bitcoin you don’t need to mine. In fact, mining is a very laborious and for many a poor way to obtain bitcoins. Buying a bitcoin is of course the easiest way. Also, like any other kind of money, you may earn bitcoins by offering products and services. You can quickly and securely trade bitcoins with other people around the world with your local currency.

Bitcoins Brings Several Benefits To The User

Payment is as easy as sending e-mails and the bitcoins has no risk of identity theft. It will also save money because bitcoin economy does not have traditional middlemen taking a share. Bitcoin is also currency that you can save as bitcoin value can not be hampered by creating them from scratch. There are only a limited number of bitcoins, which makes it a good investment opportunity.

The biggest benefit, however, is the fact that you can transfer money from one person to another anywhere in the world and it can be done quickly, privately and almost free. Because it is a global money you can use it anywhere where there is internet.

Historically, the bitcoin liquidity has been quite good. What I mean is that bitcoins can be changed quickly at a reasonable rate to another currency, such as dollars or euros. Exchange rate developments are impossible to predict, but at this point it appears that bitcoin is going to be with us for quite some time.

The bitcoin benefits are enormous also from the merchant point of view. It is difficult to cheat retailers, because bitcoin transfers are irreversible. Handling costs are also smaller than any other means of payment. All of this is reflected in the prices.

Bitcoins has some excellent features compared to the normal currency

  • They are limited to a maximum amount of 21 million units
  • The emergence of new coins, the speed is constant, and the pace will slow down all the time -> no inflation
  • No single entity is not managed currency
  • Works with peer-to-peer networks, in which case no single party can not close the network
  • Transactions are anonymous and fast, they pass directly without the middleman

Examples of Bitcoin Wallets

  • bitcoin.org
  • blockchain.info

Bitcoin is such a new phenomenon that the technology is changing very fast. You should therefore always investigate the matter itself, before to use a particular service or software provided.

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