6 Basic Questions about Bitcoins, Answered

I assume that almost all of us who are involved in business and finance have heard about Bitcoin. To some, it’s just a fad. To some other, it’s a wealth of opportunity. Well, if you are in doubt in deciding on which side you will stand, let’s get some Bitcoin basics covered, shall we?

What is Bitcoin?

1. What is a Bitcoin?

A Bitcoin is basically a cryptocurrency or digital money. It is a decentralized payment network powered by users without a central authority managing or regulating it. The first specifications and proof of concept on Bitcoins was written by a programmer who called himself Satoshi Nakamoto (he has since left the project). The project is now run by a community of developers who have introduced many innovations into it.

From a user’s perspective, Bitcoin is like cash. The Bitcoin technology is not owned by anyone, just like no one owns email. Developers can improve the software, but they cannot force people to switch to their version because users have the freedom of choice.

The Bitcoin network shares a public ledger or block chain. Every transaction ever made using Bitcoins is registered here, allowing verification.

2. How many Bitcoins will there be?

Unlike hard currency, the number of Bitcoins mined will never go over 21 million. When the individual(s) created the algorithm for mining Bitcoins, they built in a feature to limit the number of Bitcoins mined.

Currently, 12 million and counting Bitcoins have been mined and only nine million more are up for grabs. The system was created so that mining Bitcoins in the beginning was easy and it becomes harder as time goes on. Consequently, the last Bitcoin will be mined in the year 2140.

3. What is Bitcoin mining?

Bitcoins can be obtained in three ways – you can buy them on an exchange, accept them in lieu of goods or services or you can ‘mine’ them. You can mine Bitcoins in three ways – hardware mining, software mining and cloud mining.

Where to mine? Well, there are some reputable Bitcoin crypto exchange platforms that serve thousands of traders and miners, such as CEX.io (this platform serves more than 280,000 traders – and counting.)

4. How popular are Bitcoins?

A large number of businesses and individuals are using Bitcoins to carry out transactions. Businesses can include your typical brick and mortar joints, apartments, restaurants, law firms and popular internet services like Reditt, Flattr, Namecheap, WordPress and others. Many e commerce sites also accept Bitcoin payments. Even though Bitcoin is new phenomenon, it is rising quickly. As of 2013, the total worth of all Bitcoins in existence was $1.5 billion. The total worth of all transactions involving Bitcoins everyday goes into millions of dollars.

5. How do you make payments with Bitcoins?

To make or receive a Bitcoin, you should have a Bitcoin wallet, either on your smartphone or on your computer. Bitcoin payments are simpler than credit/debit card payments and you can receive them without setting up a merchant account.

6. Are Bitcoins legal?

Bitcoins are not illegal in any country. However, some jurisdictions have banned or severely restrict dealings in foreign currency. In other jurisdictions, licensing of Bitcoin exchanges is limited, like Thailand.

All in all, it’s coming back to your perception, really. Many say that Bitcoin is risky. But hey – what is not risky today when it comes to currency (fiat money, anyone?)

Here’s an article you should read to help you conclude: http://www.forbes.com/sites/realspin/2014/09/18/five-objections-to-using-bitcoin-we-should-finally-put-to-rest/