Maybe some of you have heard of the digital currency Bitcoin in the news lately. It has gained attention due to its growing popularity as a new form of payment.
What is Bitcoin?
Bitcoin is a digital currency that is exchanged over the Bitcoin peer-to -peer network. The network is comprised of every single bitcoin user worldwide. Bitcoin is a global currency and is not regulated by any government body or authority.
How do transactions work?
Currency is stored in a digital wallet under the user’s unique Bitcoin address and can then be used and traded over the network. All transactions are recorded in a public ledger called the “block chain.” This record contains every transaction ever made and is used and maintained by everyone on the network to verify and record new transactions.
How are new Bitcoins created?
New Bitcoins are created through the process of “mining.” Mining is the work that is done by computers on the Bitcoin network to process transactions and secure the network. This work is rewarded by transaction fees and newly minted bitcoins. Anyone can become a miner with their own computer, but only the most powerful computers will be able to make money, as the mathematical equations required to mint new Bitcoins are very complex. It is also worth noting that the currency has an upper limit of 21 million. This means that only 21 million bitcoins can ever be created.
The uses of Bitcoin
Bitcoin has been known to be an avenue for illegal activity around the world. This is mostly because the currency is not overseen by any government body and is easily transferred across the world for little or no cost. Some countries have already put tight restrictions on the digital currency. Like China, who has banned its banks from accepting bitcoin. Whether restrictions like this will be effective, is something that has yet to be seen.
While Bitcoin still has a reputation for facilitating illegal activities, more and more legitimate business are accepting Bitcoin. Not only are online businesses accepting this as a form of payment, but brick and mortar stores as well.
The value of Bitcoin
Skeptics of Bitcoin often question how the currency derives its value, since there is nothing physical that is tied to a Bitcoin. However, Bitcoin proponents argue that the scarcity of the currency as well the willingness of individuals and businesses to accept it, give Bitcoin value like any other modern currency.
Whether Bitcoin is just another bubble waiting to burst or the next big thing in the digital realm, it is a hot topic right now in the financial world that is worth your attention. If you would like more information please visit the Bitcoin website at: www.bitcoin.org