If you have continuously heard about Bitcoins on the news lately, you may have found yourself wondering what all of the buzz is about and what you need to know about using the virtual currency.
Before you open your own Bitcoin wallet and dump a portion of your life savings into investing in Bitcoin, it is important to gain a little background information. Bitcoins are relatively new and have only been around since 2009. First invented by a mysterious programmer, possibly even a group of programmers in 2008, the currency went into trade just one year later. Early adoptees of the virtual currency mined coins using computer software. It is still entirely possible to do so today, although many new fans of Bitcoins choose to buy them or procure them through trade.
Perhaps one of the most interesting aspects of this completely decentralized virtual currency is the fact that it has a built in market cap. The total number of Bitcoins that can ever be generated is set at 21 million, a number that will be reached in 2140. As a result, the currency is completely self-sustaining and is specifically designed to prevent inflation.
If you are not interested in mining Bitcoins and simply want to understand more about how to use them for gambling or to purchase an ever-increasing array of goods and services, what do you need to know?
First, it is important to be aware that Bitcoins, much like real currency, are stored in a wallet. The only difference is that your Bitcoin wallet is not stored in your pocket but instead on your computer. There are various types of wallet options available today, including destktop options for maximum security and mobile apps for individuals who want to have easy access to their virtual currency for spending purposes.
In order to access and spend your Bitcoins, you must have a private key. Each key is comprised of a long series of letters and numbers. Without your key, you cannot gain access to your Bitcoin address or wallet. This is why it is of paramount importance that you protect your private key. If you lose the key, you lose the ability to access your Bitcoins. Since there is not a central authority that issues the virtual currency, you have absolutely no recourse if you lose the key.
Additionally, it is important to understand that by their very nature, Bitcoin transactions are irrevocable. Unlike when using your credit card, you cannot purchase an item with your Bitcoin funds, decide you are not happy with it, and appeal to a third party, such as your credit card company, with a grievance.
Bitcoins are also known for their built-in anonymity. For users who have grown weary of data breaches and the potential for identity theft when using traditional forms of payment for online purchases, the level of anonymity offered by Bitcoins can be a welcome breath of fresh air.
As Bitcoins gain increased notice, the ways in which they can be spent continually expands, as well. In the early days, only a handful of extremely limited options accepted Bitcoins. Today, even mega online retailer Overstock.com accepts Bitcoins.
The value of Bitcoins is dependent solely on demand. Consequently, the virtual currency has experienced some volatility, rising to more than $1,000 recently before dropping later. Although the digital currency is completely decentralized and is not regulated by any government or central bank, the response of countries around the world has frequently had an impact on the value of Bitcoins. The most notable such incident occurred when China restricted the use of Bitcoins.
Individuals wishing to purchase Bitcoins frequently use a Bitcoin exchange for doing so or for converting their Bitcoins into real cash. With more and more online retailers now accepting Bitcoins, the ability to make purchases online using the virtual currency has also grown increasingly easier.