If you’ve been around the internet and the finance industry, you probably heard of Bitcoin. Chances are you are wondering just exactly what a bitcoin is. Maybe you don’t understand how it exists, or where you can find one.
Well, even though there isn’t a straight answer to either one of those questions, you can get a better understanding of what a bitcoin truly is by reading on.
Bitcoins are a type of currency. They don’t exist in reality, and not even on paper. They exist only in the computer world. It represents a type of value and yes, you can buy things with bitcoins. Just like regular money, they don’t have any other alternative use or material value (just like the U.S. dollar, or Mexican Peso) other than what the market says they are worth.
Where Did Bitcoins Come From?
Bitcoins were first invented in 2009 by an anonymous person calling themselves Satoshi Nakamoto. Nakamoto created the Bitcoin technology, and devised a way to exchange them without using any other party besides the two people involved in the transaction.
The bitcoins themselves were created solely on a computer, and that is where they continue to reside. There is not material form of a bitcoin, or paper currency backing the bitcoin.
What is the Bitcoin?
The bitcoin is a simple unit of currency that exists on a server. You can buy the bitcoins on an open market at one of the many bitcoin exchanges with real American dollars, the Euro or any other world currency.
Once you purchase the bitcoin, it goes into a digital wallet residing on a cloud server or your own computer. Youcan exchange the bitcoins for other services, or material goods.
Companies accept Britons as currency from your digital wallet and give you the goods in exchange. Others can exchange bitcoins through mobile devices or another type of “virtual wallet” software.
All bitcoin transactions are logged, however no names are ever tied to the transactions. When you make a transaction with Britons just your wallet ID is attached to the transaction. That means every purchase or exchange is truly anonymous. This has led to a rise in the use of Bitcoin for illegal purchases.
Who Creates Bitcoins?
One interesting aspect of Bitcoin is people can actually create them on servers by tasking a computer to solve math problems. This is currently referred to as mining a bitcoin. As more are mined, more bitcoins go into circulation.
Along with buying bitcoins on the open market, you can mine your own if you have enough computing power and the right program.
Bitcoin Safety and Stability
Bitcoin is not protected by the FDIC. So, your bitcoins are not reimbursed if someone steals them somehow. The bitcoin can be stolen right off your computer by a talented hacker. Since bitcoins are purely software, a virus can wipe them out as well.
Several governments frown on the use of bitcoins including China, and European central governments. Simply because the bitcoins lack the safety nets of existing currency, the nations are skeptical. Many nations, including the United States, are more accepting of Bitcoin.
Source: http://en.wikipedia.org/wiki/Bitcoin
+Katrina Matthews is a product specialist and blogger for RackSolutions, manufacturer of custom racking solutions for businesses! She likes giving data center advice and IT tips on our blog.
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