What are Bitcoins?

Lately the world has been conversing about Bitcoin and its soaring prices. I kept hearing about it and kept wondering what it is, until finally I decided to do my research and figure this out. What I discovered was a digital-only form of currency that has been around since 2009. It can be spent, traded and sold just like stocks. There is no central bank or government that can regulate it and you can buy or ‘Mine’ it for free. The only catch is that it is digital currency which is tempting for hackers.

Satoshi Nakamoto is the pseudonymous person or group of people who designed and created the original Bitcoin software, a community of developers runs Bitcoin as a free open source project. It relies on an internet based peer to peer network and the ‘money’ is automatically given to ‘Bitcoin Miners’ who confirm transactions as they are added to a transaction log (every 10 minutes). The log is authenticated by digital signatures.

Every 10 minutes, 25 new Bitcoins are generated. In 2017 this quantity will be halved to 12.5 and every four years after, the same will happen until all 21 million Bitcoins have been ‘mined’ and put into circulation(around the year 2140). At today’s date there are over 11 million active Bitcoins with a worth of over $2.3 billion.

You can obtain Bitcoins either by trading, buying or mining them. Purchasing is the easiest way but it comes at the expense of your hard earned cash. In order to buy, you will have to sign up for an online service like MyWallet, Coinbase or Instawallet (no longer active). You link your bank account to your online wallet (much like PayPal) and from there you can buy or sell coins at the market price.

 Mining takes computer processing power and often bears little fruit unless you are part of a mining group or have a small farm of supercomputers. Mining involves running software on your computer to solve the complex mathematical equations that make up the Bitcoin transactions. The miner gets a payout for this service and is then allowed to sell. The issue is that your computer is up against groups of computers that will probably mine the coin before you. So you will want to join a mining group that splits the rewards of coin transaction. It may take time to build your Bitcoin fortune but it’s free.

The crisis in Cyprus, economic uncertainty in Europe, increased media coverage and a lack of faith in traditional currencies has led to the rise in alternative currencies. Bitcoin value has gone up and down. In 2011 the USD to BTC exchange rate plummeted from $33 to $2.51 and has taken until February to recover. Since February of 2013 though, Bitcoin value has gone from $30 all the way up to $210 as of April 9^th. In the past, power outages and hacks have devalued the coin and this rapid rise has fueled concern that it is experiencing a bubble that could pop at any time.
 

For now, it would be good to think of Bitcoin like Facebook credits. You purchase them to buy goods and play around but you wouldn’t want to put your savings into it would you? If you wish to transfer small amounts of money without government regulations/taxes then Bitcoin is your market. Just be carefull not to put all your coin in one basket, this is virtual not brick and mortar.