Bitcoin 101: An Introduction To This Facsinating Digital Currency!

You may have heard about Bitcoin in the news but how much do you really know about this digital currency? Here are the basics!

What exactly is Bitcoin?
Bitcoin is an untraceable digital currency that is not controlled by any government. Bitcoins can be transferred among online users without a financial intermediary. 


How long has Bitcoin been around?
Bitcoin was launched in 2009.


Who created Bitcoin?
No one knows the founders real identity. Bitcoin was started by a developer (or group of developers?) that used the pseudonym Satoshi Nakamoto and has since disappeared. 


Where do you keep Bitcoins?
Most Bitcoin holders set up a virtual wallet through a third party website. You could also store Bitcoins on your computer. 


How do you spend Bitcoins?
If you have a virtual wallet you can send them to other virtual wallet holders as long you know their anonymous identification numbers. 


So are these virtual wallet firms basically just banks for Bitcoins?
In a sense, but most banks invest the money you deposit with them while Bitcoin wallet firms generally don't. Also, unlike most banks, Bitcoin wallets do not have the backing of federal government insurance on deposits (i.e. FDIC).

Is Bitcoin a very stable investment?
No, the price of Bitcoin is currently very volatile. That's not to say it is a bad investment in the long term. Time will tell. 


Where do new Bitcoins come from?
The creation of new Bitcoins is automated and limited (to twenty one million). As new Bitcoins are created they are obtained by a process called "mining" where computers compete to solve very complex mathematical problems the fastest. The fastest solver for each problem wins a specified amount of the new Bitcoins and then a new problem is presented.

If Bitcoins are untraceable won't they likely be used for illegal transactions like drug trading?
Yes. This is one worry many people have about Bitcoin. 


How many Bitcoins are there?
As of January 2014, approximately 12.2 million Bitcoins have been created. The total supply will be limited to 21 million.

Can a Bitcoin be divided in smaller units?
Yes. Each Bitcoin can be divided in 100,000,000 smaller units, defined by eight decimal places.

Why is Bitcoin transformative?
According to http://www.bitcointrust.co/, "The price of bitcoin has increased significantly over the past year as early adopters and notable thought leaders have recognized the potential for bitcoin to innovate and disrupt as 1) store of value; 2) global currency; and/or 3) global transaction network.