What is Bitcoin? – A Quick Introduction

| 2017-12-08

What is Bitcoin?

Although Bitcoin is formally known as a cryptocurrency, it can easily be thought of as digital cash, or virtual currency. Instead of carrying physical cash or coins, Bitcoin users make electronic transactions on the Bitcoin payment system. Units of digital currency called Bitcoins are used to store and transmit value among users in the Bitcoin network. When Bitcoin users are ready to purchase something or use Bitcoins, they simply verify and complete the transaction.

  • Bitcoin can be thought of as virtual currency.
  • Decentralization

    The Bitcoin global payment system uses cryptography technology to enable peer-to-peer transactions without the aid of an intermediary. Unlike traditional currency, which is controlled by a central authority (e.g., a government) all transactions and transaction verifications are done by various people within the network. Thus, Bitcoin and other cryptocurrencies are said to be “decentralized.”

  • Bitcoin is a decentralized, peer-to-peer payment system.
  • Wallets

    Bitcoin users must possess access to “wallets” in order to use Bitcoins. A wallet can be likened to a bank account. Wallets are software programs that function to store public and private keys, which are used to receive and send the cryptocurrency, respectively. They also provide the cryptocurrency balance. It should be noted that wallets actually don’t store cryptocurrencies, however. Cryptocurrency is stored and maintained on the publicly available ledger. The private key allows a user to “write” in the public ledger, meaning they can spend the cryptocurrency.

  • Bitcoin users must open a "wallet," which is similar to a bank account.
  • Value

    Bitcoin derives its value from its global payment solution. As more people and businesses begin to accept Bitcoin as a store of value and currency, its demand will rise. Additionally, only 21 million Bitcoins will ever be “mined.” Mining is the process by which cryptocurrencies are created. This means that a limited supply of Bitcoin will ever exist. As fiat currencies across the globe begin to fail, the use of Bitcoin and other cryptocurrencies will increase.

  • Bitcoin's value is based on its use acceptance.
  • Purchasing Bitcoin

    Bitcoin can be purchased from an exchange, such as www.coinbase.com (click here). It’s important to know that Bitcoins and other cryptocurrencies do not have to be purchased in whole amounts. That is, fractions of a coin can be purchased. This makes entry into cryptocurrencies accessible to anyone. Investors are attracted to Bitcoin because of its profit potential. Since its inception, many early adopters have become “Bitcoin millionaires.” As demand continues to increase for the coin across the globe, people will be willing to pay higher prices to obtain Bitcoin. As large institutional investors pile in, the price will increase even more.

    Below is a video explaining some of the basics of Bitcoin further:

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