The World Of Virtual Currency – Bitcoins
Bitcoin is a type of virtual currency. Per Wikipedia it is a Worldwide payment system. That alone shall leave you with a great deal of questions. Lord knows I have been confused by it all. But let’s try together to make some sense of Bitcoin.
Since Bitcoin is an online currency, it can be easily transferred from one person or another, to another. Unlike traditional currency, it is not controlled by any institution or government. The Federal Reserve has no place in the world of Bitcoin – instead this is a peer to peer transaction that operates by computer and users. A digital address identifies the owners of the currency although the identify of the owner is not revealed due to encryption.
Here’s where it can easily become confusing – Bitcoins are created through mining which is the process of adding records of a new transaction to the Blockchain – the public ledger of all transactions that have ever taken place in the Bitcoin network. New transactions are added in batches called “blocks” approximately every 10 minutes. The ledger is needed to always be able to confirm valid transactions.
To begin you need to set up a wallet and fill it up with Bitcoin through the Bitcoin exchange. Through the exchange you try to buy Bitcoin at the lowest possible prices while sellers try to sell Bitcoin at the highest possible price. Once you have Bitcoin in your wallet – you can make purchases through stores that accept it as a form of payment. When you make a purchase to a vendors unique address the transaction is processed through miners. Mark Dukas can help you make sense of all the Bitcoin cents!
Now I want to be clear – there is more than one type of virtual currency. So when someone in conversation refers to virtual currency, it is not synonymous with Bitcoin. Think of mayonnaise – yeah I know strange comparison. Mayonnaise is like virtual currency and Hellmans is like Bitcoin. But there is also Kraft, Miracle Whip and so many others. What other types of virtual currency are there? Well as the moment there are: Bitcoin, Litecoin, Ripple, Dogecoin and Peercoin – though Bitcoin is the most popular and most widely accepted. I believe the list may be even larger but those are the virtual currencies that I have heard of.