What is Bitcoin? Report gives the lowdown on Bitcoin

By Nicel Jane Avellana

Nov 26, 2013 03:19 AM EST

In just ten months, the price of the Bitcoin has risen from USD 13 to USD 900. As the digital currency grows, curiosity about it has also increased.  In its idiot guide to Bitcoin, a Wired report explained that the Bitcoin is not only a form of currency but also a way of making payments, the way you would with credit cards or PayPal. An open source software that is governed by the laws of mathematics control the Bitcoin.

A programmer or group of programmers under the name Satoshi Nakamoto invented the Bitcoin software five years ago and released it online. The software is designed so that it can run on large network of machines which are called Bitcoin miners. Since anyone can use the miners, the system is also designed to grow. The Bitcoins have value because the supply is limited. When there are already 21 million bitcoins produced, the system will stop producing the digital money. Because of this, the value of the Bitcoin will also increase together with the demand.

In order to send your Bitcoins to someone else, you will need your address as well as the address of the person you will be sending your Bitcoin to. You will also need to provide your private cryptography key to authorize payment. Programs, called wallets which may be installed on your computer, phone or on a website, allow you keep track of your Bitcoin transactions.

The first step towards getting Bitcoins is to get a wallet. After that, you can buy and sell bitcoins in Coinbase, a website which basically acts on your behalf to buy and trade Bitcoins on an exchange in exchange for a fee of 1%.

When you already have Bitcoins, you need to protect your wallet since your digital money can be easily stolen if thieves get access to your online wallet or private key. Some Bitcoin users take the extra precaution of saving their wallets on a thumb drive which separated from their computers, the report said.

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