What exactly are Bitcoins?
Bitcoins are a digital currency that can be transferred securely between any two people in the world. Think of it as electronic cash that you can use to buy goods and services. Ultimately, a bitcoin is a number associated with an address. A person can have as many addresses as they want
How does it work?
Every transaction that has ever happened with Bitcoins are recorded in a public ledger called a block chain. Whenever a new transaction happens, for example Person A sends money to Person B, it is added to the block chain in an encrypted format. In order to confirm that the transaction is valid, individuals called miners will use their computers to break this encryption and finally confirm that Person A did indeed send money to Person B. The reward for miners dedicating their computers to confirm these transactions is Bitcoins.
Only a fixed number of Bitcoins are released at a time. As time goes on, breaking the encryption and therefor being rewarded more Bitcoins becomes harder and harder.
A transaction being sent from person to person, showing how the network of individuals called miners verifies the transaction.
What gives Bitcoins their value?
One difference between Bitcoins and normal fiat currencies like the dollar is how they get their value. Normal fiat currencies get their values from government and private banks and agencies. Bitcoins however are valued based on how people choose to value them. When many people are using Bitcoins to buy goods and services, or to trade them for fiat currencies the demand goes up. Since there are a fixed number of Bitcoins in the world at any given moment, that demand increases their value. There are several websites that track the value of Bitcoins.
Can I accept Bitcoins at my business?
Businesses have already started accepting Bitcoins as payment such as Virgin Galactic and BitcoinShop.us. Services such as Bitpay have also been popping up giving shop owners and businesses a quick way to integrate Bitcoins into their payment systems. To learn more, check out this Getting Started page at the Bitcoin Wiki.
Read More
