Bitcoin – the virtual banking currency of the internet – has existed for several years now and many people have questions about them. Where do they come from? Are they legal? Where can you get them? Why did they split into Bitcoin and Bitcoin Cash? Here are the basics you need to know.
What Are Bitcoins?
Bitcoins are electronic currency, otherwise known as ‘cryptocurrency’. Bitcoins are a form of digital public money that is created by painstaking mathematical computations and policed by millions of computer users called ‘miners’. Bitcoins are, in essence, electricity converted into long strings of code that have money value.
Why Bitcoins Are So Controversial
Various reasons have converged to make Bitcoin currency a real media sensation. From 2011-2013, criminal traders made bitcoins famous by buying them in batches of millions of dollars so they could move money outside of the eyes of law enforcement. Subsequently, the value of bitcoins skyrocketed.
Ultimately, though, bitcoins are highly controversial because they take the power of making money away from central federal banks, and give it to the general public. Bitcoin accounts cannot be frozen or examined by tax men, and middleman banks are completely unnecessary for bitcoins to move. Law enforcement and bankers see bitcoins as ‘gold nuggets in the wild wild west’, beyond the control of traditional police and financial institutions.
How Bitcoins Work
Bitcoins are completely virtual coins designed to be ‘self-contained’ for their value, with no need for banks to move and store the money. Once you own bitcoins, they behave like physical gold coins: they possess value and trade just as if they were nuggets of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years.
Bitcoins are traded from one personal ‘wallet’ to another.
A wallet is a small personal database that you store on your computer drive, on your smartphone, on your tablet, or somewhere in the cloud.
For all intents, bitcoins are forgery-resistant. It is so computationally-intensive to create a bitcoin, it isn’t financially worth it for counterfeiters to manipulate the system.
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