Bitcoin: How Does It Work?

March 12th, 2018

Bitcoin is a virtual banking currency system online, that has been on the market since 2008. Even though it has been available for ten years, this digital currency still remains shrouded in mystery. People want to know what Bitcoin is and they have many questions on how to use and make money using Bitcoin. Below you will find the answers to some of the basic Bitcoin questions, so that you can start buying, trading, and selling Bitcoin today.

Cryptocurrency Defined

Bitcoin is also referred to as a cryptocurrency, yet many people don’t know what that means. Basically, cryptocurrencies are computer codes that hold monetary value. High performance computers create these monetary codes for people to use. Digital currency is beginning to infiltrate the daily market for buying and selling goods. This form of digital money, which is created by solving complex algorithms is policed by several interfaces worldwide-known as miners. Physically speaking, Bitcoin only exist in the virtual world (it is not a tangible asset). However you can exchange “real money” for digital currencies either online or at a Bitcoin ATM (BTM Kiosk).

What Are Bitcoins?

Even though Bitcoin continues to make headlines daily since it first began circulation in 2008, little is known about its creator, Satoshi Nakamoto.There are several advantages for Bitcoin users. This money can be stored on or offline, depending on the type of digital wallet the user has. Bitcoin can be used for transactions both online and offline, as well. Currently, as the most popular digital currency, the price of Bitcoin is soaring and investors have began to show interest in this new currency system. Since Bitcoin is the first cryptocurrency to come out to the public market, there have been many other digital currencies since then. These include:

  • Litecoin
  • Feathercoin
  • Peercoin
  • Altcoin
  • Ethereum

How To Use Bitcoins To Your Advantage

Bitcoin users from across the globe can send, recieve, or store bitcoins over the internet. Bitcoins are virtual coins that were designed to be “self contained” for it’s value. This means that financial institutes, governments, and banks have no hold over this decentralized currency.

Buying and/or selling bitcoins is easy. There are several online exchanges, as well as, Bitcoin ATMs that are available in most large cities around the world. Once you buy bitcoins, you can use them to buy products, goods, and services. Some Bitcoin users are even storing their bitcoins for investment purposes, by saving a lump some hoping for an increase in value in the future. Since the start of Bitcoin, the value has certainly continued to increase, so for many investors this is a smart decision. If you do save your bitcoins, you’ll need to become familiar with the tax laws concerning Bitcoin.

Bitcoin are traded using the user’s digital wallet. These digital wallets allow you to send and receive money within just a few moments. A digital wallet is like a small personal database, where you can store your Bitcoin information like you would on a hard drive or smartphone.

How Are Bitcoins Being Tracked?

Since bitcoins are a decentralized currency, many people want to know how you can possibly keep track of all of this information. Bitcoin uses a public distributed ledger called the Blockchain. Each blockchain is unique per user and their Bitcoin wallet. All digital transactions are logged and made public on the blockchain. This keeps all transactions authentic and accounted for. This allows helps to prevent fraud and that transactions are not duplicated.

Every Bitcoin records the digital address of the user’s wallet, but it does not record personal information. This means that while every Bitcoin transaction recorded it still remains completely anonymous at the same time. This is great for public history and privacy.

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