Monday, December 2, 2013

What is Bitcoin and how does it work?

You may have heard last week that a single Bitcoin unit reached a value of $1000. Lots of people have been asking lately about them. So.... what are they and how do they work? Here's some details snagged from, a site that was put together and went up last week from Mt. Gox.
What is Bitcoin? Bitcoin is a digital currency you can use for personal transactions or business at high speed and low cost. 
How are Bitcoins created?
Instead of being made on a printing press or by a central authority, Bitcoins are created through software available to anyone. Individuals and groups willing to dedicate computer processing power to support the Bitcoin network are rewarded with Bitcoins for their work. This process is known as mining. Most Bitcoin users do not mine, but purchase or trade for their Bitcoins. Mining doesn't affect the average Bitcoin user much, but is still a very important part of the Bitcoin ecosystem.

How are Bitcoins secured?All newly mined Bitcoins, along with every transaction, are publicly recorded. This record is known as the blockchain. While the blockchain records transaction details, it does not record any personal identifying information about the senders or recipients. The blockchain is a critical feature to maintain the transparency of the Bitcoin system, and make counterfeiting or double spending impossible.  
How do you use Bitcoins?Let's look at a step-by-step example. Say you want to give some Bitcoins to a friend to pay for gas on a roadtrip. You’ve both got the bitcoin app on your mobile devices and have internet connectivity. 
  1. Find out your friends wallet address by typing, pasting, or scanning it. You can then save the address to use later if you want. 
  2. Convert your desired currency amount into Bitcoin.Verify the desired payment amount and send.  
  3. The amount in Bitcoin is now deducted from your balance, and entered into the blockchain as a transaction so they cannot be spent twice.  
  4. Your friend immediately sees the unverified transaction. 
  5. The transaction is verified on the network, and then deposited into your friends wallet.
Be sure to check out the along with the Mt Gox site for more details.

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