- Bitcoin is a digital global money system. It allows you to send or receive money across the Internet. The mathematical field of cryptography is the basis of Bitcoin’s security.
- It’s Decentralized which means that no one particular party owns it.
- You can buy products on the Internet or cash them in for local currencies. Thousands of retailers online now accept Bitcoin (Overstock, Crate and Barrel, Nordstrom, Amazon gift cards).
- Bitcoin can be bought through online exchangers using a credit card or bank draft.
- Bitcoin is stored in a digital “Wallet” (just like a bank account without a bank). Wallets can be stored on a website, on your computer alone, on a cell phone, a device, or even on paper. (all cryptographically password protected)
- A digital Wallet contains online Bitcoin addresses and a private key (a big long alphanumeric password).
*Bitcoin addresses: They are like a bank account number. You may have 4 or 5 or more in your Bitcoin wallet. Each address (like a bank account #) has a balance. The balance could be from $0 to 1 million or 50 million or whatever.
*Private Key: a secret code (like a PIN #) is generated for each address (like a bank account#) where you hold your Bitcoin. There is only one secret code and only the user knows it.
- You can spend Bitcoin online or at a local retailer (I recommend you only put into your phone wallet what you plan to spend – like cash in your wallet). Example: Go to subway (some in California accept Bitcoin) or a shop (that accepts Bitcoin) scan the QR code on the bill they give you and then send to the Subway or store’s Bitcoin address.
- The transaction is processed on an open digital ledger called the Blockchain network. It is processed by miners (all over the world on thousands of computers).
*Everyone sees the transaction and address, but NOT your Private Key, your bitcoin balance, or your personal data.
- The transaction is encrypted = turned into an alphanumeric code. Then it is included with other transactions in a “Block”. Thousands of miners work to verify it. Miners receive 6.25 Bitcoins for verifying or solving a block. This ensures that no Bitcoin is ever spent twice, no Bitcoin is hijacked, and no personal data is exposed – unlike a credit card transaction.
- There are a limited amount of Bitcoins – 21 Million. They will not all be in circulation until around the year 2140.
- The cost or fee for a transaction by miners over the Blockchain can be as low as .01 USD.
The cost to send Bitcoin overseas through the internet is almost nothing. Western Union and other remittance agencies charge an average of 2 to 3 %. Remittance is a multi-billion dollar industry. International immigrants are sending $500 Billion dollars a year back to family members in their respective countries.
- Is it real? US Citizens must pay the IRS taxes on all Bitcoin capital gains. It’s real enough for the IRS to tax it! It’s as real as the money in your bank but its acceptance is not universal yet.
- Can you buy groceries with it? Not just yet, but it’s probably a matter of time (although you can buy them with a debit card linked to your Bitcoin account).
- Is it Safe? A Bitcoin transfer can be safer than a credit card transaction as it doesn’t involve personal credit card data.
- There are currently more than 2000 types of crypto-currencies or virtual currencies.
There are 4 Reasons Why Bitcoin will gain in value over time:
1) There is only a limited supply. Even more limited than Gold because more gold can be mined and found.
2) It’s essentially the first trans-national currency.
3) The instability of world governments and world economies
4) It has a store of value like silver and gold.