What is bitcoin?

What is bitcoin?


Bitcoin, often described as a cryptocurrency, a virtual currency or a digital currency - is a type of money that is completely virtual.

It is like an online version of cash. You can use it to buy products and services, but many shops do not accept bitcoin yet and some countries have banned it altogether.

The physical bitcoins you see in the photos are a novelty. They would be useless without a private code printed inside them.

How does bitcoin work?

Each bitcoin is basically a computer file that is stored in a 'digital wallet' app on a smartphone or computer.

People can send bitcoins (or part of one) to your digital wallet, and you can send bitcoins to other people.

Each transaction is recorded in a public list called a blockchain.

This makes it possible to trace the history of bitcoins so that they prevent people from spending coins they do not have, which make copies or pre-ing transactions.

How do people get bitcoins?

There are three main ways that people get bitcoins.

You can buy bitcoins using 'real' money.
You can sell things and pay people with bitcoins.
Or they can be created using a computer.

How are new bitcoins created?

For a bitcoin system to work, people can transact their computer process for everyone.

Computers are built to extract incredibly hard money. Sometimes they are rewarded with bitcoins for owning them.

People set up powerful computers to try to get bitcoins. This is called mining.

But the amount is becoming more and more difficult to prevent many bitcoins from being generated.

If you have just started mining then it may take years for you to get a single bitcoin.

You can spend more money on electricity for your computer than it is worth bitcoin.

Why are bitcoins valuable?

Apart from money, there are many things which we consider valuable like gold and diamonds. Aztec used cocoa beans as money!

Bitcoins are valuable because people are ready to exchange them for real goods and services and even cash.

Why do people want bitcoin?
Some people like the fact that the government or banks do not control bitcoin.
People can also spend their bitcoins anonymously. Although all transactions are recorded, no one knows which 'account number' is yours unless you have told them.
is it safe?
Every transaction is recorded publicly, so it is very difficult to counterfeit bitcoins, fake or spend those you do not have.

It is possible to lose your Bitcoin wallet or delete your Bitcoins and lose them forever. It has also been stolen from websites that allow you to remotely store your bitcoins.

The value of bitcoin has increased over the years since it was created in 2009 and some people do not think it is safe to convert your 'real' money into bitcoin.

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