What is Bitcoin?

Bitcoin is a cryptocurrency and a virtual type of money. It’s really like having an online version of money or cash. You can use Bitcoin to purchase products and services and more and more vendors are accepting Bitcoin as a form of payment these days. Some countries feel very threatened by Bitcoin and have banned it completely.

There are no physical Bitcoin tokens. You may have seen pictures of Bitcoins but these are fabrications. The worth of a Bitcoin resides in the private codes they have imprinted inside them.

Every Bitcoin is just a computer file stored in what’s called a digital wallet. We will discuss digital wallets in more detail in a later chapter. If you have a digital wallet then other people can send you Bitcoins or fractions of them. You can also send Bitcoins or fractions to others using your digital wallet.

Every Bitcoin transaction is recorded publicly using blockchain technology. This is a transparent network where anyone can trace the history of Bitcoin transactions. All records in the blockchain are immutable meaning that you cannot copy transactions, change the amount of Bitcoins owned or use Bitcoins that you don’t own.

There are several ways that you can purchase Bitcoins including:

• You can purchase them using your native currency through a cryptocurrency exchange
• You can sell products and services in exchange for Bitcoins
• You can use a Bitcoin ATM
• You can “mine” Bitcoins

The practice of mining Bitcoins has been going on for a while. In order to do this you will need high end computer equipment and lots of it. These computers perform complex algorithms to guess secret codes. If your computers guess right you get Bitcoins as a reward.

We will not be recommending mining as a way of obtaining Bitcoins in this guide. There are only a limited number of Bitcoins so the process of mining is now incredibly complex. You could spend years mining for Bitcoin and spend a great deal of money on computer equipment and electricity costs
without earning any Bitcoins.

You may be wondering why Bitcoins are so valuable. When Bitcoin first started it had no value but in five years a single Bitcoin was worth around $1,000. At the time of writing a Bitcoin is worth around $8,000.

Why this jump? Well there are a number of other things in life that have value. Diamonds and gold are a good example. Bitcoins have value because people are willing to trade them for real products and services and also buy them for cash.

People like the idea that any governments or central banks do not control Bitcoins. They also like the fact that Bitcoin transactions are pretty anonymous. Yes there is a record of all Bitcoin transactions but very few include real world identities.

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