Cryptocurrencies and especially bitcoins are becoming a very popular subject in the consumer space and professional FinTech spaces alike. I wrote this article for everybody who is curious what bitcoins are, where they come from, and what you can actually buy with bitcoins. I hope you find this article informative and if you have anything to share or add, please drop us a comment below. Also, for getting more information about the cryptocurrency world, you can join courses such as those created by Dchained.
What Are Bitcoins?
Bitcoin is a virtual currency, digital asset, and system to transfer payments. It is said that the inventor is Satoshi Nakamoto, but there is no evidence that this person exists, and there are some controversies about his whereabouts as well. The bitcoin system has been introduced in 2009 and is the first currency with a global scope, managed decentralized, and relies mostly on digital transactions. Bitcoins are also considered to be the first cryptocurrency (medium of exchange using cryptography). There have been previous systems, but they were not adapted well.
As of right now, one bitcoin is worth 413.48 US Dollars. Because of the high value of a single bitcoin, there are also subunits, similar to how one dollar is worth the subunit of 100 cents. The bitcoin subunits are millibitcoin (10−3), microbitcoin or just bit (10−6), and satoshi (10−8), named after the inventor.
How Does That Work?
Bitcoins are regulated and managed decentrally using a public blockchain as a ledger to record bitcoin transactions. The blockchain is maintained by leveraging a network of nodes running bitcoin software. When a bitcoin payment is made, this happens in the network of the blockchain, and the change of amount on the side of the payer and the side of the payee is then decentrally calculated with the help of the node’s computing power.
Where Can You Get Bitcoins From?
Where do bitcoins come from? One way of obtaining bitcoins is to use a regular money exchanging platform similar to how you would swap Dollar to Euro if you wanted to. The difference is that the bitcoin has no standard physical format, so usually, the exchange to bitcoins would happen digitally on the internet. Bitcoin.com offers a good overview of currency exchange services in your region.
Another way of obtaining bitcoins online is mining. The blockchain cannot work without nodes, consisting of people who run bitcoin software on their PCs in order to help calculate money transfers. Transactions can be prioritized by increasing the share for the miners. With a higher share, the transaction will then be actioned faster. You could consider this a transaction fee, which value helps to speed up the overall transaction progress.
What Can You Buy with Bitcoins?
So you made some bitcoins or exchanged your money to get bitcoins. What can you actually buy with them? The acceptance of bitcoins in the physical world is still not great, but some places try to stand out by offering their clients to pay with bitcoins. Contrasting popular belief, even major companies such as PayPal, Microsoft, Dell, Expedia, and Time Inc. are offering to let clients pay online with bitcoins to some degree.
The answer to the question is “Potentially everything.”. This is entirely up to retailers, vendors, and service providers to consider in their portfolio. This particular niche of facilitating exchange from bitcoin to goods is also an interesting market in itself. For instance, the service PizzaForCoins.com allows people to take their bitcoins and order a pizza from Domino’s.
Have you had experiences with using bitcoins? Are you afraid of using bitcoin as a currency? Do you think they are a bubble and will pop anytime soon? I would love to hear your thoughts, so add your comments below. Many thanks for reading!
YouTube: What is Bitcoin Mining?
Photo credit: Graingert / Targaryen / BTC Keychain
Editorial notice: Microsoft no longer accepts bitcoin trasnactions. We updated this article on the 13th of April 2016 to reflect that.
