Intro to bitcoins
A bitcoin is basically digital cash.
Imagine for a moment that the $20 bill in your pocket suddenly developed the ability to transport itself anywhere in the world, at your command. That’s the bitcoin. Pretty simple actually. Just like cash, you can pay for goods and services with bitcoins. Also like cash, you keep your bitcoins in a “digital wallet”. Unlike cash, though, a bitcoin is impossible to counterfeit and it can travel anywhere at the speed of the internet.
But wait, isn’t that what credit cards are for?
Yes. Paying with bitcoins is similar to paying by credit card, only much easier. When you buy something with a credit card online, your payment has to go through a middleman, like VISA for example. That middleman has to answer two questions:
- Do you have enough money to pay for the item? and
- Are authorized to spend that money?
To answer those questions, you have to include all kinds of personal information about yourself. The credit card company then has to process that information and keep it secure. Unfortunately, there are a lot of weak points in the system and as a result, credit card companies are constantly fighting fraud. Identity theft is a growing problem, and the work that credit card companies do to process transactions and prevent fraud costs a lot of money. That expense gets passed on to the merchants who accept credit cards for their goods and services. As a result, we pay 3-5% too much for things that would be cheaper if credit cards were not the de-facto standard for electronic payment.
With bitcoins, things are a lot easier.
When paying with bitcoins, there is:
- No middleman
- No fees
- No risk of identity theft
You simply enter the amount that you want to send, and the address you want to send it to, and hit “send”. It’s like a wire transfer from me to you, with NO banks needed. Easy!
There’s one last thing you should know about bitcoins. There will never be more than 21 million bitcoins in existence. There is a limited supply of them and the demand just keeps going up. As the demand rises, so does the value. Many people have already become millionaires by investing in the bitcoin economy. If that’s not a reason to be interested in bitcoins, we don’t know what is!
For more details on bitcoins, check out the links below:
The non-profit company that manages bitcoin’s open source software is here: bitcoin.org/
Heres the link to download a free, bitcoin wallet: Choose your wallet
A good guide for those new to bitcoin is here: Bitcoin Millionaire: Cashing in on the Digital Currency Revolution (ebook)