Bitcoin is the first decentralised digital currency. It is transfered from person to person and not through a bank or clearing house. It has very low fees and can be used in every country. Your account can not be frozen as with banks or paypal. There are no prerequisites or limits so nobody can approve or disapprove you using bitcoin, unlike a bank where you have to apply for an account.
a bitcoin address
Bitcoins are stored in a digital “wallet”. There are wallets that you can download onto your computer or you can use online wallets (if you use online banking then it will look similar).Then you enter in the address that you want to send to. An address is similar to a bank account number. It is a group of upper and lowercase letters and numbers. When you press send then the network (the miners) will verifiy your transaction. This transaction will then be permenitly stored in the block chain.
Ok where do I get some bitcoins and where can I use them?
Some people say that bitcoin is the “most dangerous open source project ever“. That it could eliminate the need for national currenices and banks. Others call it the “Regianl currency of the internet”. A virtual currency? Currency ok I also have currencies in my wallet, euro, dollar, pound, yen. If im hungry I can go down the street and buy some dougnuts. I give him some money and I get some doughnuts, or if my heater breaks I can pay the repair man and get my heating fixed. With bitcoins it is the same. I can buy a service or a product.
So what is the difference?! Euro and Dollar ect are controled by central banks. The central bank or federal reserve loans the money on to the banks, the banks loan the moeny to the people. This is a debt based currency. With bitcoin it is different. There is no central bank. There is a limited ammount of Bitcoin, so no central bank can print more money. The code behind bitcoin is 100% open source. Anyone can take a look “under the hood”. All transactions are recorded on a public ledger called the “block chain”
information about a transaction on the block chain
Virtual currenies are nothing new. The linden dollar was created in the game “Second Life” and there are exchanges where you can exchange this virtual curreniy into dollar, euro yen ect. There is a big difference. Linden dollars are controled by a central organization unlike Bitcoin which is self regulated by the bitcoin network.