It’s no actual coin, it’s “cryptocurrency,” an electronic form of payment that’s produced (“mined”) by many individuals worldwide. It allows peer-to-peer transactions instantly, worldwide, for free or at suprisingly low cost.

Bitcoin was invented after decades of research into cryptography by software developer, Satoshi Nakamoto (thought to be a pseudonym), who designed the algorithm and introduced it in ’09 2009. His true identity remains a mystery.

This currency isn’t backed by a tangible commodity (such as gold or silver); bitcoins are traded online making them a commodity in themselves.

Bitcoin can be an open-source product, accessible by anyone who is a user. All you need is an email address, Access to the internet, and money to begin with.

Where does it result from?

Bitcoin is mined on a distributed computer network of users running specialized software; the network solves certain mathematical proofs, and searches for a specific data sequence (“block”) that produces a specific pattern when the BTC algorithm is applied to it. A match produces a bitcoin. It’s complex and time- and energy-consuming.

Only 21 million bitcoins are ever to be mined (about 11 million are currently in circulation). The math problems the network computers solve get progressively more difficult to keep the mining operations and supply in check.

This network also validates all the transactions through cryptography.

How does Bitcoin work?

Internet surfers transfer digital assets (bits) to one another on a network. There is absolutely no online bank; rather, Bitcoin has been described as an Internet-wide distributed ledger. Users buy Bitcoin with cash or by selling a product or service for Bitcoin. Bitcoin wallets store and utilize this digital currency. Users may sell out of this virtual ledger by trading their Bitcoin to another person who wants in. Anyone can perform this, anywhere in the world.

There are smartphone apps for conducting mobile Bitcoin transactions and Bitcoin exchanges are populating the web.

How is Bitcoin valued?

Bitcoin isn’t held or controlled by way of a financial institution; it really is completely decentralized. Unlike real-world money it cannot be devalued by governments or banks.

Instead, Bitcoin’s value lies simply in its acceptance between users as a form of payment and because its supply is finite. Its global currency values fluctuate according to supply and demand and market speculation; as more people create wallets and hold and spend bitcoins, and much more businesses accept it, Bitcoin’s value will rise. Banks are actually trying to value Bitcoin plus some investment websites predict the price of a bitcoin will be several thousand dollars in 2014.

What are its benefits?

There are advantages to consumers and merchants that are looking to use this payment option.

1. Fast transactions – Bitcoin is transferred instantly on the internet.

2. No fees/low fees — Unlike credit cards, Bitcoin can be used for free or very low fees. Without the centralized institution as middle man, you can find no authorizations (and fees) required. This improves profit margins sales.

3. Eliminates fraud risk -Only the Bitcoin owner can send payment to the intended recipient, who is the only one who is able to receive it. The network knows the transfer has occurred and transactions are validated; they cannot be challenged or taken back. Buy Gift Cards With Crypto That is big for online merchants who are often subject to credit card processors’ assessments of whether or not a transaction is fraudulent, or businesses that pay the high price of credit card chargebacks.

4. Data is secure — Once we have seen with recent hacks on national retailers’ payment processing systems, the web is not always a secure place for private data. With Bitcoin, users do not give up private information.

a. They have two keys – a public key that serves because the bitcoin address and an exclusive key with personal data.

b. Transactions are “signed” digitally by combining the public and private keys; a mathematical function is applied and a certificate is generated proving an individual initiated the transaction. Digital signatures are unique to each transaction and can’t be re-used.

c. The merchant/recipient never sees your secret information (name, number, home address) so it’s somewhat anonymous but it is traceable (to the bitcoin address on the general public key).

5. Convenient payment system — Merchants can use Bitcoin entirely as a payment system; they do not need to hold any Bitcoin currency since Bitcoin can be changed into dollars. Consumers or merchants can trade in and out of Bitcoin along with other currencies at any time.

6. International payments – Bitcoin is used around the world; e-commerce merchants and service providers can easily accept international payments, which start new potential marketplaces for them.

7. Easy to track — The network tracks and permanently logs every transaction in the Bitcoin block chain (the database). In the case of possible wrongdoing, it is easier for law enforcement officials to trace these transactions.

8. Micropayments are possible – Bitcoins can be divided right down to one one-hundred-millionth, so running small payments of a dollar or less becomes a free of charge or near-free transaction. This may be a genuine boon for convenience stores, coffee shops, and subscription-based websites (videos, publications).