What is Bitcoin?

bitcoin-logoWhat is Bitcoin?

Bitcoin is a new way of digitally storing and sending money. It was created after the 2009 banking crisis, and it was designed from the ground up to eliminate unscrupulous bankers by removing the need for financial middle men.

Bitcoin reduces the role of highly paid bankers down to an algorithm. Thanks to its dis-intermediation of financial institutions and tiny transaction fees, Bitcoin can be thought of as digital cash. It’s no exaggeration to say this technology will do the same to money as email did to the postal service.

Why trust Bitcoin?

Bitcoin relies on what is known as public key encryption. A user has a public key and a private key. A message encrypted with someone’s private key can only be decrypted with the corresponding public key, thus proving who encrypted it. This same form of encryption enables two people to create messages that can only be opened by each other. Bitcoin uses the same technology when generating transactions.

Bitcoin has something called a block chain, which is a ledger of all the transactions ever made. It’s public and copied across the whole Bitcoin network. A process called “mining” is used to create a consensus of the order of transactions on the network. It’s the combination of encryption and transaction consensus that makes it impossible to forge or double spend bitcoins.

How to obtain Bitcoin

The most straight forward way to get some bitcoins is to buy them. There are a number of bitcoin exchanges where you can deposit fiat money and buy bitcoins from sellers. In the UK, it’s worth checking out BitbargainBittylicious, and Local Bitcoins UK. All of these sites allow you to pay for bitcions via UK bank transfer.

It should be noted that bitcoins are also created by the aforementioned mining process. There are currently 12 to 13 million bitcoins in circulation with an upper limit of 21 million that can ever be made. However, the cost of bitcoin mining equipment is now prohibitively expensive, but you can purchase mining contracts from sites such as CEX.IO.

Accepting Bitcoin in your business

Accepting Bitcoin as payment is another way you could get hold of the currency. Sending bitcoins can be as simple as entering a wallet address and the amount. Therefore, using in Bitcoin in your business can be very simple, but there are more sophisticated solutions. There are PayPal-like services who help you to integrate Bitcoin into your business. Check out: BitPayCoinBase, and BIPS. You can also find more information on the Bitcoin Wiki.

9/3/2014 David Gilson is a freelance journalist and consultant specialising in cryptocurrencies and mobile consumer tech. Follow him on Google+Twitter, or Facebook.

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