Bitcoins are a decentralized, open-source, worldwide digital currency. It is not controlled by any bank or owned by any government.
Unlike other currencies (which can be easily manipulated and controlled) Bitcoin transactions are transparent and can be verified on the global Bitcoin spreadsheet – referred to as the "BlockChain".
The BlockChain is made up of thousands of computers around the world, all verifying transactions within the Bitcoin network.
The spreadsheet (BlockChain) is actually duplicated and synced live around the world through thousands of computers. This process is very similar to a peer-to-peer system which has no focused centralization, thereby not allowing any single person or organization to manipulate the BlockChain data.
The only essential component that you need to perform Bitcoin transactions is a Bitcoin wallet. Bitcoin wallets are free – you should never have to pay to use a Bitcoin wallet. You can download and install Bitcoin wallet software on your computer (or mobile device) or you can sign up of an online wallet service.
Bitcoin transaction fees are either at 0% or a tiny fraction compared to the cost of a credit card transaction or a bank transfer fees. Also, when compared to other international online transactions, the time taken for verification is dramatically reduced – on average; a transaction is verified within 20 to 30 minutes.
Why Are Bitcoins Better Than Traditional Currencies?
Unlike traditional currencies, Bitcoins are not printed. There is simply no need to do such a thing – it is completely unnecessary.
Banks around the world simply print out more and more money in a vain attempt to cover their national debt. This constant "money printing" floods the market – thereby reducing the actual value of the currency.
Bitcoins however are created digitally by many people around the world. Do you have a good working computer? If you do, then you can create (mine) Bitcoins. Bitcoins are "mined" using computing power in the distributed worldwide network. "Bitcoin Mining" is the task of processing and securing each transaction to verify and lock them into the "BlockChain" ledger.
So is there an upper limit to the total amount of Bitcoins that are in use around the world? Yes there is. The Bitcoin protocol – the code and mathematical rules that Bitcoins are based on state that there will only ever be a total of 21 million Bitcoins created by miners.
This finite number means that Bitcoins are deflationary, rather than inflationary like all other national currencies; i.e. because the banks are constantly printing more money to cover debt and to fill new loans, the value of the other currencies as a whole falls – thus we have inflation.
However with Bitcoins, only 21 million can ever be created, so this currency is deflationary. As the demand for Bitcoins rise, so will its price, since there is a fixed, definite, limited supply of Bitcoins to trade.
Now you're probably asking yourself "Well if there are only 21 million Bitcoins to trade, how can this be all shared with billions of people"? Well here's the answer. Every individual Bitcoin is broken up into 8 decimal places (0.00000000) so there are 210 trillion units of Bitcoin in use. There are more than enough Bitcoin units (also known as satoshi) to share with everyone around the world many times over.
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