Bitcoin is a type of virtual currency. It can be used to make payments for internet transactions without transaction fees or having to use the involvement of a financial institution.
Other facts about bitcoin:
- This innovative currency was created in 2009 as a peer-to-peer electronic cash system. Trust in the bitcoin currency is based on the fact that all transactions pass through a sophisticated cryptographic system.
- The core concept is that through a maze of complex math and programming code, all transactions are recorded with a time stamp which ensures that the coin can only be used once.
- Technically, you could “mine” Bitcoins by solving complex mathematical problems. Because that is so hard, most individuals just buy bitcoin from the many exchanges (coinbase.com is one) popping up.
- The exchanges charge a 1% or less fee to convert traditional currency to bitcoin and to transfer it back to cash.
- The creator of the currency (an anonymous entity or person called Satoshi Nakamoto) capped the number of coins at 21 million of which 11.1 million have been put into circulation. (Because of this cap, some investors think the value of Bitcoin will increase.)
- Bitcoin is attractive to some because it is an inexpensive and anonymous way to do transactions across borders.
- Critics contend it will never become a mainstream currency because of the formidable regulatory and technical hurdles it faces.
- It has shown vulnerability to internet attacks.