Bitcoin is a decentralised, digital currency that enables instant, anonymous transactions anywhere in the world. Bitcoin is also the name of the open-source software/protocol which created and launched Bitcoin.
Bitcoin Up uses peer-to-peer technology to operate with no central authority; managing transactions and issuing bitcoins are carried out collectively by the network. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.
This article provides answers to some common questions about Bitcoin, based on recent conversations on the BitcoinTalk forum.
Q: What are bitcoins?
A: Bitcoins are the unit of currency of the Bitcoin system. A commonly used shorthand for this is “BTC” to refer to a price or amount (eg: 0.5 BTC). There are such things as physical bitcoins, but ultimately, a bitcoin is just a number associated with a Bitcoin Address. A physical Bitcoin coin may or may not have any Bitcoin value assigned to it. Physical coins can be created as novelty items which people collect, similar to baseball cards.
Bitcoin Peer-to-peer Technology
Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain. Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Bitcoin can also be held as an investment. Bitcoin became the world’s largest cryptocurrency in November 2013 but has since been surpassed by other cryptocurrencies. Bitcoin is more correctly described as the first decentralised digital currency. It is the largest of its kind in terms of total market value.
Creation of Bitcoin
Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger. This activity is called “mining” and miners are rewarded with transaction fees and newly created bitcoins. Besides mining, bitcoins can be obtained in exchange for different currencies, products, and services. Users can send and receive bitcoins electronically for an optional transaction fee using wallet software on a personal computer, mobile device, or web application.Â
Bitcoin units have no intrinsic value compared to traditional currencies because they are not linked to a central bank, and may be used for black market transactions. Bitcoin is more correctly described as the first decentralised digital currency. Bitcoin as a form of payment for products and services has seen growth, and merchants have an incentive to accept digital currency because fees are lower than the 2-3% typically imposed by credit card processors.
The European Banking Authority has warned that Bitcoin lacks consumer protections. Unlike credit cards, any fees are paid by the purchaser not the vendor. Bitcoins can be stolen and chargebacks are impossible. Commercial use of Bitcoin is currently small compared to its use by speculators, which has fueled price volatility.
What is a Bitcoin Wallet?
Bitcoin wallets are digital or software programs that store your Bitcoin keys. Bitcoin keys are unique codes that allow you to access your Bitcoin. Bitcoin wallets also store your Bitcoin transaction history.
There are a number of different types of Bitcoin wallets, each with its own advantages and disadvantages. Some of the most popular Bitcoin wallets include:
- Bitcoin Core: Bitcoin Core is the original Bitcoin wallet. It is open source and gives you complete control over your Bitcoin. However, it requires a lot of disk space and can be slow to sync with the Bitcoin network.
- Bitcoin Wallet: Bitcoin Wallet is a popular, user-friendly Bitcoin wallet. It is available for Android and iOS devices and allows you to easily send and receive Bitcoins. Bitcoin Wallet was the first Bitcoin wallet that could connect directly to a Bitcoin node using simplified payment verification (SPV).
- Blockchain.info: Blockchain is one of the most popular Bitcoin wallets. It allows you to send and receive Bitcoins from anywhere in the world with ease. Its user interface may be less user-friendly than other Bitcoin wallets, but it makes up for this by also requiring minimal setup steps, allowing any level of Bitcoin users to quickly use its services.
