Bitcoin has been in the news lately, and this has led to quite a few people asking the same question: what are bitcoins? Basically, the bitcoin is virtual currency, unlike other currencies that are represented by coins and paper money. It only exists online, but you can still use it to buy services and goods provided the merchants accept the currency. It’s quite new (it’s only been in use for just a couple of years or so) but its popularity is growing exponentially.
How to Use Bitcoins
Paying with bitcoins is much easier to do than paying with a credit or debit card. You just use a bitcoin “wallet” app that’s installed in your computer or smartphone. You simply enter the address of the recipient and the amount you’re paying, and then press send.
It’s that easy. But the underlying question is, where can you get bitcoins in the first place? There are several ways you can get bitcoins. You can decide to accept the bitcoin currency in exchange for goods or services, for example. You can also buy bitcoins from a Bitcoin exchange, although the price of a bitcoin can fluctuate a lot. In mid-November of 2013 the price of a single bitcoin was $568, and by December 27 the price is already $757.
There is also a process called bitcoin mining, which requires lots of computer power to discover bitcoins online. There are only 21 million bitcoins in existence, and so far only a little more than 11 million have been mined. Once you have your own bitcoins, you store them on your “wallet”.
The Advantages of Bitcoins
Using bitcoins as currency has proven to be quite advantageous, and that’s why it’s becoming more popular every day. First of all, it’s decentralized currency, so bitcoin users have more freedom. You can send and receive any amount you wish, to anywhere at any time. And when you do so, the processing fees are comparatively miniscule compared to credit card or PayPal fees.
For consumers, it’s also quite a relief to know that using bitcoins doesn’t involve disclosing any personal information. Merchants are also unable to force unnoticed or unwanted charges, which can happen when using other payment schemes. For merchants, it’s also a huge advantage because they’re protected from potential losses due to fraud.
The Future of Bitcoins
For now, there are still very few merchants that accept bitcoins, compared to those who accept credit cards. But that situation is changing rapidly, as more consumers and more merchants are beginning to realize just how convenient bitcoins can be. Bitcoin programs are also incorporating newer tools and features, and the security is stronger than ever. Since just about everyone these days has a computer or a smartphone, it’s inevitable that sooner or later bitcoins will be just as ubiquitous as credit cards.
So what are bitcoins? Essentially, it is the dollar of the future that’s being used today.