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What Are Bitcoins

     Bitcoins Explained

Bitcoin is a form of virtual currency. With them, you do not have to physically buy goods by handing tokens or notes. They are mostly used for electronic transfers and purchases. You can, therefore, use Bitcoins to pay merchants or even friends. With Bitcoin, every purchase that one makes is logged in on the transaction log, which tracks vital information such as who owns Bitcoins and the time of purchase. To easily understand how the Bitcoin system works, think of the transaction as an audit trail that contains every single piece of vital information of every Bitcoin. This digital transaction is what is referred to as Block-Chain. Why the Price of a Bitcoin is Different at each Exchange

Bitcoins are more or less like other currencies when it comes to value. They simply fluctuate in values that are relative to other currencies. Just like how the Indian rupee had its value swinging wildly against major currencies like the US dollar; Bitcoins have had drastic fluctuations on Bitcoin charts. Since there is no centralized exchange for Bitcoin, its value is constantly changing on Bitcoin charts. Any time a Bitcoin changes ownership from a seller to a buyer, the two parties involved in the transaction must agree on a price. There is no such thing as a fixed price. It is simply the seller's responsibility to give the buyer a fair valuation based on what Bitcoin charts indicate. All these can be understood since there is no bank that prints Bitcoins and sets relative values on Bitcoin charts. It always depends on supply and demand.

There are three major Bitcoin exchanges MTGOX, BTC-e and BitStamp. MTGOX is simply an exchange that allows Bitcoin users to trade Bitcoins for currencies like the US dollar, British Pound or Indian Rupee. It is based in Japan. BTC-e, on the other hand, is a Russian trade platform solely meant for selling Bitcoin and a number of other crypto-currencies. The last Bitcoin exchange is Bitsmap. It is based in Slovenia and allows Bitcoin users to exchange Bitcoins for US dollars.

Note that there is a big difference between bitcoin and Bitcoin. The difference lies in capitalization of the letter 'b'. bitcoin refers to the entire system while Bitcoin refers to the currency. You have to understand the difference as most Bitcoin news and traders assume that all the other users understand the difference. Speaking of news, Bitcoin news in most journals and media outlets will not only help you to understand Bitcoin Charts live but the Day Trade Bitcoin which keeps changing from time to time. This means that you will always have to keep abreast with the Bitcoin news so as to know of the best Bitcoin exchange rates and understand more about Bitcoin charts.

Bitcoin Transactions

Bitcoin users can send and receive payments using client software on their personal computer, mobile device or via a web application. Transactions do not explicitly identify the payer and payee by name, a transaction transfers ownership from one Bitcoin address to another. Approximately every ten minutes, a block of transactions is confirmed to a shared public record called the block chain. This competitive mining process carries a reward of 25 bitcoins per block.

Example Bitcoin Address: 1JdGHcZ9FzVSwLhTxxp2XkYw8uUPEdADHH Bitcoin Software

Bitcoin client software, allows a user to transfer bitcoins. The first software was released in 2009 by Satoshi Nakamoto as an open source code (Bitcoin-QT). Bitcoin-Qt can be used as a desktop client for regular payments or as a utility for merchants or other payment services. Bitcoin-Qt has also supported mining, but this feature was removed because specialized mining clients seem more efficient. Wallets An Example of a Physical bitcoin A paper wallet Showing QR codes

Bitcoin creates public key cryptography, in which pairs of keys, one public and one private, get generated. A collection of keys is known as a wallet. A Bitcoin transaction transfers ownership to a new address, an alphanumeric string of the form.

The private keys create a safeguard; a valid payment message from an address must contain the associated public key and a digital signature proving possession of the associated private key verified by a bitcoin miner. Because anyone with a private key can spend all of the bitcoins sent to the corresponding address, the essence of Bitcoin security is protection of private keys.

Theft of bitcoins has occurred in the past. The practical security of Bitcoin wallets remains an to be a concern. Risk of theft can be reduced by generating keys offline on an un-compromised computer and saving them on external storage or paper printouts, like cheques.

Many vendors currently produce physical bitcoins. Bitcoin Block chain

Important to Bitcoin is a public database and a record of all transactions, known as the block chain. The block chain records current bitcoin ownership as well as a history of past bitcoin ownership. By keeping a record of transactions, the block chain eliminates the possibility of double-spending. Those that maintain the block chain are called miners. Payment processing work done by miners verifies each transaction and adds it to the block chain. Bitcoin processing fees are optional and generally lower than those of credit cards or electronic money transfers. By 2140 there will be approximately 21 million bitcoins in existence and transaction processing will be by transaction fees. Today's transactions that pay a fee may be processed more quickly. Exchanges Further information: Digital currency exchanger

Through bitcoin exchanges, bitcoins get bought and sold at a variable price against the value of other currencies. While there may be a seemingly large number of bitcoin exchanges, they regularly fail taking client bitcoins with them. Bitcoin Economics

Bitcoin's supply is predefined by the Bitcoin network. Currently there are over 12 million bitcoins in circulation, with a creation rate of 25 bitcoins approximately every ten minutes.

Since the money supply is fixed bitcoin is known as "inflation-proof". At present the price of a bitcoin is volatile, which has led to some questions about it functioning as a currency. Some may say that this is a necessary "growing pain", and that Bitcoin needs to grow to achieve stability.

Volatility has little effect on Bitcoin's uses as a payment option for goods since merchants don't need to price their goods in bitcoin and can immediately exchange their bitcoins for dollars. Processing fees are substantially lower than those of credit cards or money transfers making bitcoin attractive to merchants. Bitcoin is a good Alternative to national currencies

Bitcoins are accepted in this caf in the Netherlands as of 2013

Some people say that Bitcoin is gaining popularity in countries with problem-plagued currencies, as it can be used to circumvent inflation, capital controls, and international sanctions, bitcoin can be a solution to increases in national debt.

Bitcoins are being used by some Argentinians as an alternative to the official currency, which is hampered by inflation and strict capital controls. In addition, some Iranians use bitcoins to evade currency fees and online purchases.

Article Source: was developed with the intent that members of the bitcoin community could benefit from accurate explanations explaining what are bitcoins. Accompanied by a live bitcoin community news feed and interactive bitcoin charts, has everything a member of the bitcoin community needs. Additional Resources:

Posted on 2014-02-18, By: *

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