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A Beginner’s Guide to Bitcoins
Although Bitcoins have been around since 2009, the hype and fascination over the unregulated virtual currency has increased rapidly. There are currently 11 million Bitcoins in existence, but no more will be made once 22 million have been created. Confused about the Bitcoin? Let’s take a closer look at the cryptocurrency.
SECTION 1: Bitcoins at a Glance
The Bitcoin (BTC) is a virtual currency, created by a slow computer process called “mining.” The international currency is not regulated by banks and can be used to purchase goods from anywhere in the world. It also trades like a stock or material currency.
<<CALLOUT>> As of May 2013, each Bitcoin is worth about £80.73, or $140.
• 11 million — Number of Bitcoins now in existence
• 22 million — Maximum number of Bitcoins that will be mined
• £1.06 billion* — Value of all Bitcoins currently in circulation
*Rate at $1.6 billion at time of conversion.
The Bitcoin’s creator, under the pseudonym Satoshi Nakamoto, is widely unknown to the public. Few in the world know the developer’s actual identity, and only a handful of users have talked with him. As of April 2011, Nakamoto said he has “moved on to other things” and has vanished from the Internet.
Here are just some of the regularly used terms in the Bitcoin universe.
Bitcoin Client - Software that receives and sends Bitcoins.
Wallet - Most often referring to a file that stores Bitcoin addresses and the private keys needed to use them.
Bitcoin Address – An alphanumeric identifier (e.g.: 13ignD31FysQbaBBVJUzffcQoFxxEuEcbE) representing a payment destination, similar to e-mail, required to send someone Bitcoins.
Private Key - A hidden secret number related to an address, which permits access to send Bitcoins. If the key is lost, the currency in the wallet is gone forever.
Bitcoin Network - The network of computers through which Bitcoin transactions are broadcasted. It also helps maintain the blockchain.
Blockchain - A public list of all transactions ever sent. This allows everyone to know which Bitcoins belong to whom.
Bitcoin Protocol – This means that every node in the network is required to download a copy of every Bitcoin transaction.
Miner - Someone who helps create blocks added to the blockchain. If a valid block is created, the miner receives 50 new Bitcoins from the Bitcoin protocol. This is the process through which all Bitcoins come into existence.
SECTION 2: Buying Bitcoins
It’s not as easy as it sounds. Because Bitcoin transactions are completely anonymous, you must use specific methods to pay for one—which tends to get tricky.
The most widely used way to pay for Bitcoins, this method requires you to provide an exchange with your bank account information and transfer money into a Bitcoin account.
Cash-payment services, like Moneygram, compensate an intermediary at a specific deposit spot. The service then turns the cash to credit and deposits it into a Bitcoin exchange account.
<<CALLOUT>> Every 10 minutes, 50 more Bitcoins are available in the network. This pace won’t continue forever, though. The rate of production will slow to 25 more Bitcoins every 10 minutes for the next 4 years, before reducing to 12.5 every 10 minutes.
While many online retailers already accept Bitcoins, some major companies still plan to adopt the new currency.
Those companies include:
• Western Union
<<CALLOUT>> RISKY BUSINESS. On 10 April, the value of Bitcoins fell by 60%, from a short high of $265, to less than $100.
SECTION 3: Where You’ll Find Bitcoins (Top Cities)
SECTION 4: Top Bitcoin Twitter Accounts
• @BitcoinByte is the Twitter account for banking industry veteran Michael Parsons, who runs the blog Bitcoin Bytes.
• @BitcoinEconomy posts stats on the Bitcoin economy from BitcoinWatch.com.
• @BitcoinMagazine is the account for Bitcoin Magazine, known as “the world’s first magazine dedicated to the cryptocurrency.”
What to do With Your Bitcoins
• Save them by leaving them on the exchange.
• Sell them.
• Convert them to cash by selling them on the exchange.
• Transfer them to a wallet service or your own computer.
• Spend them.
SOURCES: BBC, New York Magazine, TheBitcoinTrader.com
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