What is Bitcoin?

You may have heard of it, read about it or know someone who is using it - but what exactly is it? Wikipedia defines it as a digital currency backed by a unique digital certificate. It was created by bitcoins creator Satoshi Nakamoto, Bitcoins maximal reward receiver, known as a miner, who started with a computer that was just him and his computer running.

The popularity of bitcoins is growing dramatically, and it is not just because of its name but also because it is a practical way to transfer money around the world. Unlike traditional currencies, bitcoins are not controlled by any government or central authority. Since they are not issued by any institution or bank, bitcoins become especially valuable if you want to buy a specific number of them at a time. As the popularity of bitcoins grows, more people are interested in understanding what is behind it.

What is so great about bitcoins? To start with, unlike conventional money, it is entirely computer based, and it has no physical commodity that is backed up by some physical asset. If something happens to your computer - say you lose it to a burglary or a flood, or if you loose the bitcoins due to theft, then you will not be able to get them back. Bitcoins are not like gold, and therefore you cannot be sure that you'll have them again. This makes bitcoins very attractive as a hedge against loss or damage of your hard-earned money.

A second reason why people are so attracted to the use of bitcoins is because it solves two problems that affect every other type of money: first, the centralization problem that comes with the fact that a single computing power tends to dominate the entire global processing economy. The fact that only a small part of the world can be able to run large-scale processing networks opens up opportunities for the rest of the world to be able to compete with the dominant processing technologies. As a result, it becomes possible to send and receive funds worldwide using a small amount of power compared to what it is now.

Another reason that makes bitcoins so attractive is the idea that they are a global currency. Unlike national currencies which are usually localized and change according to political conditions, bitcoins are always in use, anywhere in the world. This is one of the main attractions of the system, because you can transfer money from one place to another without having to depend on any particular country's currency. This is the main reason why millions of people convert from national currency to bitcoins each year. Because of this global trend, it is now possible to make money transfers of any size all around the world using only a couple of computers hooked up to the Internet.

Bitcoin is an innovative open-source software that allows people to process digital currency using only a few personal computers all over the world. The way it works is pretty simple. There are no actual physical coins or currency involved, it is all done digitally. Transactions are made in the same way as any other online transaction, by making payments with credit cards or through electronic transfer. Since the entire process is done digitally, it is called a peer-to Peer payment system.

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