Bitcoins: All You Wanted to Know
What is a Bitcoin?
A Bitcoin is a new currency created by an unknown individual who uses the alias 'Satoshi Nakamoto'. It was first introduced in 2009. Since then, this new virtual currency has taken a huge leap and became one of the most used methods of trading objects without having to deal with any regulations.
When you buy something using Bitcoins, you don't have to deal with any middle-men. That means no banks, no fees, and basically no rules. When this coin was new on the market, it was mostly used by illegal organizations. Drugs, guns, hitmen, nasty porn, and many more unethical trades were now possible because of Bitcoin. They continue to be possible even today, as this currency can't be tracked down by feds.
How does Bitcoin work?
From a user's perspective, Bitcoin could be nothing but a computer program, or a mobile app that allows him to log into a 'Bitcoin wallet' that makes transactions possible. That's how it works for most users. Now, let's take a look at what's happening behind the scene. What the Bitcoin network basically is: a public ledger named the 'block chain'. This ledger stores every transaction that has been processed. This way, each and every computer has the ability to verify how legit each transaction is. There are digital signatures that correspond to the sending addresses, so all the users have full control when sending and receiving their bitcoins.
How are Bitcoins Created?
Bitcoins are created using complex mathematical puzzles. These complicated processes are always sustained by computers. The main process is called 'mining'. Mining bitcoins is not a complicated process, though it has become very competitive. The so called 'miners' are helping the Bitcoin network process transactions and secure the network. Everything is done using the help of some advanced software tools. You can be mining bitcoins by leaving ten different PCs open; the process is automated. Also, the whole system is made in such a way that new bitcoins are being made at a fixed rate. There's no possibility of cheating, nor duplicating the currency.
Is It Legal?
As far as we know, using Bitcoin won't bring anyone legislative consequences. However, there are some jurisdictions that completely restrict the use of this crypto-currency. Countries such as Russia and Argentina have a very low tolerance towards foreign currencies. Bitcoin equals money. Money equals trading. Even though Bitcoin transactions have started with a purpose in mind (avoiding banks and other middle-men), it soon became extremely used for illegal purposes. Unfortunately, because of the anonymity that this currency involves, tracking down illegal activities is almost impossible.
How Do You Buy a Bitcoin?
In order for an individual to purchase a Bitcoin, he has to either deposit real money through online payment processor companies, or directly transfer them from a bank account. The money shortly arrives to a third party website which connects Bitcoin sellers and buyers. The moment the real money become available, the user can place an order. It's just like trading stocks. Everything happens through an exchange, using the main Bitcoin's network. Another way to transfer them is to send the virtual currency through a virtual wallet. Either way, everything tends to be secure, unless the servers are hacked, or your PC IP address is detained by a hacker.
What's the future of Bitcoin?
Up until now, most people were asking 'What is a bitcoin?'. Now, the question is: 'What's the future of Bitcoin'? Unfortunately, we can never be certain how what would be in the nearest future. Who knows, maybe it'll disappear or will be replaced by a new currency. But what we know for sure is that it currently dominates the crypto-currency space and a big number of individuals and businesses are using it on a consistent basis.