Bitcoin is a virtual currency created in 2009 by an unknown person using the nickname “Satoshi Nakamoto”, it has revealed very little of itself and left this monetary project at the end of 2010. More details on how to buy Bitcoin here!
The interest of this currency is to be able to carry out transactions anonymously and without intermediaries in order to be independent of the banking system. The creator of this virtual currency believes that the interventions of central agencies are the source of all the evils of the economy and in particular of the inflationary spiral.
This currency does not require any transaction fees or identification in order to perform a transaction. More and more merchants are accepting Bitcoins: for example, you can buy web services, pizzas or even a manicure service!
This currency has several advantages: it can be used anonymously, international payments are simpler and cheaper since it is not tied to any country and is not subject to any regulation. Small businesses may have a preference for Bitcoin payments since there are no credit card fees. Some people just buy Bitcoins in the hope that they will increase in value in the years to come.
You can buy bitcoins with several real currencies on marketplaces called “bitcoin exchanges”. Mt. Gox is the largest bitcoin exchange. You also have the possibility to transfer bitcoins via mobile applications or computers, the operation is similar to a virtual money transfer. However, there is still an average delay of 10 minutes before the network begins to confirm the transaction.
The bitcoins you own are stored in virtual wallets (digital wallets) that exist in the cloud or on a computer. The portfolio is a kind of virtual bank account that allows users to send or receive Bitcoins, pay for goods or save money. Unlike traditional bank accounts, bitcoin portfolios are not insured by the Federal Deposit Insurance Corporation (FDIC), which means that your deposit on the virtual portfolio is not guaranteed in the event of bankruptcy or crisis.
Although all bitcoin transactions are recorded in a public register (“Block Chain”), the names of buyers and sellers are never disclosed, only their portfolio number is. Since users’ transactions are private, you can buy or sell any property without being identified. For this reason, Bitcoin has become the currency of choice for people buying drugs or engaging in illegal activities.
But you may wonder where the money comes from since there is no bank? Commercial and central banks are indeed at the origin of money creation in our economies. Bitcoins are created via “mining” which is the process of using computer processing power to process transactions, secure the network and allow all users of the system to remain synchronized: computers are therefore paid for a service.
Bitcoin mining really means checking the block chain: every time a person sends Bitcoins to another person, the transaction is checked by the network and then recorded in the “block chain”. A block is a consolidated series of transactions that have taken place over a given period of time. The miners are therefore paid to ensure the proper functioning of these blocks and thus ensure the sustainability of the Bitcoin. In order to be able to do mining, you have to be an expert in computers and have quite expensive equipment, so it is not an activity that is accessible to everyone.
Today no one knows what Bitcoin will become, but its value is still in motion. This currency may see changes in the future in its regulation. Governments are concerned about taxes and lack of control over their currencies. But the system is built in such a way that no one can buy all the bitcoins, only a fraction of the bitcoins issued so far are sold on the exchange markets.