What Is Bitcoin?

A quick web search will tell you that Bitcoin is a form of cryptocurrency that has been in existence since 2009 when it was created by someone called Satoshi Nakamoto. That’s great if you already know what cryptocurrency is or why we would actually need it to be created in the first place. I mean, don’t we have dollars, euros, and so forth for this sort of thing? The answer is yes and no.

Why Bitcoins?

Bitcoins were created to facilitate anonymous transactions online, away from the prying eyes of governments. Similar funds including Ether, Litecoin, and Dogecoin appeared shortly thereafter. The entire group was then dubbed "cryptocurrency".

Because Bitcoin and similar payment methods are not as easy to track as ordinary cash, they quickly became popular with people engaged in criminal activities as well as individuals who disliked any governmental control over their assets. The good news is that cryptocurrencies are perfectly legal in the United States and other G7 countries. However, the United States government soon decided that citizens must pay taxes on their bitcoins earnings, just as they would for any other form of dividends.

Bitcoins are nonetheless popular because there are no fees for international or credit card transactions. They are also a good way to get money out of a failing country without being hit by large fines or restrictions. Bitcoins have even become a popular investment commodity because they have recently made great gains in value and people like to trade them in a similar manner to stocks and bonds. Since there ultimately will only be a set number of bitcoins in existence, people are also counting on the fact that their value will go up over time.

How Do They Work?

Bitcoins work much like money being used through online forums such Paypal or Venmo. The primary difference is that they have lengthy, complicated keys that owners must have handy in order to spend them. Users also need to have a digital wallet to store their bitcoins such as Exodus, Ledger Nano S, or Trezor.

Why Doesn’t Everyone Use Them?

There are still some issues that need to be worked out before bitcoins are completely safe to use. After all, there are many different ways you can lose your bitcoins. Hackers, a crashed computer, or a missing flash drive can easily contribute to the loss of your fortune. There’s also the fact that no government oversees bitcoins. The result is that they fluctuate greatly in price, even over the course of a day. It’s also impossible to reverse a bitcoin transaction. Once the money is spent, it’s gone for good.

How Are They Created?

Bitcoins are created by computers using free software programs. These machines compete against each other in a ten-minute interval around the clock to encrypt transactions. The winning machine is awarded a set number of bitcoins. This output is slated to diminish in quantity over time and it will stop entirely when there are approximately twenty-one million bitcoins in existence. The process requires a great amount of electricity and computing power, which means that most people aren’t going to be able to create their own bitcoins at home.

Where Can I Buy Bitcoins?

Prospective owners can nonetheless purchase bitcoins through cryptocurrency exchanges such as Coinbase, Bitfinex, and Bitstamp. Obtaining shares in the Bitcoin Investment Trust (GBTC) is another way to get involved without all the hassle of dealing with actual bitcoins.

It would still be wise not to put too much of your money into this form of currency as the future of bitcoins and other forms of cryptocurrency remain to be seen. If the demand for these items goes up, investors could see significant gains. However, the prices could plummet if people start to lose interest or they are no longer able to turn bitcoins back into ordinary currency.

Sources:
http://money.cnn.com/infographic/technology/what-is-bitcoin/
http://nymag.com/selectall/2017/12/what-is-bitcoin-a-guide-for-the-confused.html
https://www.coindesk.com/information/what-is-bitcoin/

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