Bitcoin FAQ

Bitcoin FAQ

1. What is a Bitcoin?

Bitcoins are digital or virtual cash that can be exchanged between friends, merchants, customers. Ideally bitcoins can be used almost anywhere regular money can be used or exchanged. The thing to keep in mind is that bitcoins are a string of mathematically generated numbers vs a physical piece of paper or a metal coin. Of course there are physical Bitcoins known as Cascious but that is another story.

2. How does it work?

Keep in mind that the concept of bitcoin is all digital. Numbers are transferred between computers on a network. Applications known as ‘wallets’ are used to store the digital information (bitcoins or BTC) and those bitcoins can be transferred over a network (internet) to another person or merchants via a bitcoin wallet. It is like pulling cash out of your wallet to pay for a cup of coffee at the coffee shop only you simply do it via your smart phones bitcoin wallet application.

3. When did all this Bitcoin stuff start?

Bitcoin was created as a math project by Satoshi Nakamoto back in 2008. Sathoshi is just a pseudonym for some anonymous person. Basically, Satoshi created some software code that is used to generate Bitcoins. A process known as ‘mining’ is used to create new bitcoin numbers which are stored in a file known as a blockchain.

4. How much is Bitcoin really worth?

The price of Bitcoin goes up and down depending on supply and demand. BTC, the trading symbol for Bitcoin is traded on a few different online trading platforms and the fundamentals of supply and demand determine the price.

5. Can the software be hacked?

Bitcoins have been stolen before but not by hacking the core code. There have been glitches and upgrades to the code but the biggest risk are the wallets that individuals and merchants use to store and transfer their bitcoins. You Bitcoin wallet, just like the walled you keep in your back pocket, must be kept secure and backed up at all times.

6. How many Bitcoins are there?

Originally, the ceiling for Bitcoin was limited to 21 million coins. The code was setup to allow new coins to be generated through mining at a rate that halves every four years until the maximum of 21 million is reached. The ceiling will be reached approximately sometime before 2030.

7. How are new Bitcoins created?

New Bitcoins are created by miners. Miners are software applications that connect to the bitcoin blockchain and help solve mathematical problems which are needed to transfer bitcoins from 1 wallet to another. Each miner is awarded bitcions for solving the math problems in the blockchain.

8. Where can I buy Bitcoins?

Several bitcoin trading platforms or exchanges are available online. MtGox is the biggest, oldest and most popular but you also have BTC-e which is gaining in popularity as well as a half dozen other marketplaces. Just google buy bitcoin and you will find quite a few. There are other places to buy bitcoin though, outside of the online trading places.  Craigslist and eBay come to mind.

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