What Is Bitcoin?
Bitcoin is a digital currency that was invented by an unknown person who goes by the pseudonym Satoshi Nakamoto. Its creation was announced in 2009, and it went live in January 2010. Bitcoins were designed to work without a central bank or single administrator. They are not issued by any government, they are self-regulated, and there is no fixed supply. Instead, there is a limit on how many bitcoins can ever exist, but this limit increases at a rate determined by users. Bitcoins can be transferred electronically to anyone anywhere in the world with internet access via the Internet.
How Does Bitcoin Work?
At its core, Bitcoin works using cryptography. Cryptography is a mathematical system that can help protect sensitive messages (such as online banking). Every time someone sends bitcoins, they use cryptographic algorithms to scramble the coins' identifying information. Once they hit the recipient's computer, the recipient unscrambles them and uses a separate piece of software to verify that the sender owns those bitcoins. This verification step ensures that the sender isn't trying to send fake money. When the transaction is verified, both parties know that they own the same amount of money and can make transactions directly, without going through a third party.
Where Can I Buy Bitcoin?
You can buy Bitcoin online, at a few local businesses or even at some bars. An example of a business selling Bitcoin would be an online exchange where you trade your dollars for Bitcoins.
What Are the Pros and Cons of Buying Bitcoin?
Pros
- Easy to store and transfer
- No third party involvement
Cons
- Potential for Fraud
- Not backed by government/central bank
- Volatile value
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