What Exactly is Bitcoin???

BitcoinNews about Bitcoin has been all over the web in the last week, but I’m sure many of you are wondering just what is Bitcoin?  Or perhaps even wondering do I need to get some Bitcoins?

The short answer is Bitcoin is digital money.  And while there are many sites that will go into detail on the ins and outs of everything Bitcoin we’re just going to provide a broad over view for those who are tired of seeing the term and not knowing what on earth is being talked about.

Via YouTube, Bitcoin’s creators have said they’re going to “revolutionize global finance”.  I doubt anyone is taking that claim seriously, but with the skyrocketing value it is clear that there is a lot of interest in this digital currency.

Bitcoins are virtual tokens that can be exchanged or used as payment just like government issued currency at online stores or with people that have jumped on this latest trend (or perhaps train wreck) to accept digital currency.  For those who are instantly brought back to other technology bubble bursts you know why I said train wreck.  There is always a chance that tomorrow the value of your Bitcoins could be next to nothing.

Unlike say US dollars you use to make local purchases or your credit card you use online now, there are no identifying numbers on the tokens to trace.  No serial numbers, no CVV codes.  So what does a Bitcoin have to offer?  Anonymity.  Who benefits from anonymity?  Those who are participating in transactions they’d like others not to know about – cocaine and Internet porn are just a couple of examples of what you can buy with your Bitcoins.  But Bitcoins aren’t just for those looking to purchase the less savory or illegal items, those who are just generally concerned about privacy have also flocked to this digital currency.

Now you may be wondering where to get yourself some Bitcoins and this is where things go from odd to hinky.  Unlike what we consider traditional currency the Bitcoin isn’t backed by anything, so for those who dislike fiat money and would prefer the gold or silver standard this currency is not for you.  Basically Bitcoins are generated out of the web; those who are signed up to participate have a little app sitting on their computer that through a process called “mining”, very slowly creates new Bitcoins in exchange for providing the computational power to process transactions.  As a new batch of coins is created they are distributed to those who had the highest computing power during the mining process.  The system is set with the one limitation that no more than 21 million Bitcoins will ever exist.

The other option for how to acquire Bitcoins is to purchase them.  However, as the value is moving rather regularly this may not be the best choice.  There have also been recent DDOS attacks on Bitcoin related products and services that may be hackers attempting to cause instability in Bitcoins relative price.

Ok, so lets say you’ve gone through getting the Bitcoin app, you’ve made it through a mining process and now have your first Bitcoins to spend, where can you spend them?  You’re first option, if you’re just in it for the skyrocketing value is to exchange your Bitcoin(s) for Yen or Dollars.  In May 2011 a single Bitcoin was trading against the US Dollar for $7.50 as of April 2013 a single Bitcoin was trading near $250.00.  For those looking to spend their currency BitPay.com has over 1000 merchants and the trade section of the Bitcoin wiki contains a partial list of businesses who offer all kinds of products.  Bitcoins also breakdown to as small as .001 BTC.

To really get anywhere with your Bitcoin mining you won’t want to try it from just a single computer; pools have been created so you can work together with others and earn Bitcoins more quickly.

Are Bitcoins the wave of the future?  Will Bitcoins revolutionize global finance?  Or will Bitcoins be the next big tech bubble to burst?  Only time will tell, but for those interested in jumping into Bitcoins we’ve attached some additional links below.

To Get Started you’ll need to get a Wallet.  Coinbase is an example of an online Wallet.

Joining a Pool like Slush’s Pool.

Get a Miner, GUIMiner is a simple miner for Windows users. Linux users like GCMiner.

And in the end Bitcoin mining is all about the money, so take a look at this Bitcoin Profitability Calculator.

As a result of the limitation of the maximum number of Bitcoins there can be in existence  as more are found they become harder and harder to find. So for those jumping into the game now, it may cost more to run your hardware than you will gain in Bitcoins.


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