I’m going to explain you what is Bitcoin in the simplest way. I won’t talk about very technical things about Bitcoin because this website is not really targeting the “techies” who already knows everything about this money. You don’t really know what is happening under the hood of your credit card network right ? You won’t have too with Bitcoin and other currencies based on the same kind of network.
Let’s get you started !
Bitcoin is a currency that only exist on the internet. It’s 100% digital. It’s a new way to send money quickly and safely to anyone in the world just using your internet connection.
How new Bitcoins are created, is there a limit ?
New Bitcoins are created by the rewards awarded to miners, who are verifying the transactions. The limit of total Bitcoins is : 21 millions. Which makes it a very scarce currency. After reaching the limit, the rewards will be only based on the transactions fees. The limit will normally be reached around the year 2140 and until then, the bitcoins given to miners will halves. The next halving will be in 2016.
Who created Bitcoin ?
Actually no one knows. The creator is using a Japanese nickname “Satoshi Nakamoto”. While he was still an active developer of the currency in the early times, he completely disappeared now, leaving the other developers in charge. For some people it’s kinda mysterious and scary to not know who’s behind what is now a multi-billions dollars valued currency. But the code is open-source (anyone can see it and review it) and a lot of people trust it now, so there is no problem about this.
When I hear “Bitcoin” the “scam” word is not that far away in the newspapers etc. Is it really a legit money ?
As I said before, Bitcoin is being trusted by thousands if not millions of people across the world. I know that, before, digital currencies have been created and revealed to be a Ponzi-like scam (see for example the Enten in Japan), but this is not the case of Bitcoin. Very early investors were rewarded with ludicrous return on investments simply because the coin value skyrocketed. It would have been the same if they had been buying Apple stocks in the 90’s. Bitcoin absolutely don’t reward anyone with others money like a Ponzi scheme. Anybody that say that does not know how Bitcoin work or what is a Ponzi scheme.
But what about Mt. Gox and other proven scams all over the internet ?
Mt. Gox have been a disaster but it’s yet to be proven that it was a scam. Other scams often involve ponzi-like scheme (huge returns in a very short span of time, called “High Yield Investment Programs”), cloud-mining operations etc. Those scams are using Bitcoins, yes. But It’s like they would be using dollars, yen or euro. It’s just the currency of choice for scammers these days but it does not mean that the currency is a scam itself. And, good news, websites like investbitcoinguide.com will help you avoid those scammers. So don’t worry, here you are on the good side.
Why not just do a bank transfer/wire ?
First, bank wires mostly takes a lot of time. Even a domestic one will take half a day to be completed. With Bitcoin you’re done in roughly 10 minutes. The transfer is instant but the verifications takes a little more time.
Often you just can’t buy things with a bank transfer, it’s rare on the internet.
I have a credit card, why no just use it ?
First, there is something that Bitcoin can do that credit card can’t. You can send money to any people that are not a company. Credit card are sometimes not completely free (and expensive for the shop that is using it) and the card issuer often verify your salary, account. With Bitcoin no one will bother you, you don’t have to trust a thid party and remain anonymous.
So now you see : Bitcoin can be used for payments (like credit cards), for remittances (and much more efficiently than banks). Only using the internet and a Bitcoin wallet. That is a currency that makes you free while being able to use it for payments on the internet.
Ok great, but Paypal is good for this kind of things as well.
Yes, Paypal can do it. But you’ll need again to trust a third party to handle your money. Some people have had many problems with them. Check this website for example.
With Bitcoin you have the choice : use a third party wallet that makes life easier or store it in your device.
Is there any downsides using Bitcoin ?
Let’s be honest here, yes. Bitcoin’s price is very volatile so your freshly bought coins could lose value the minute after you bought them (or gain value as well), so be careful about that. It’s an awesome way to transfer money but it’s still new, so always buy what you can afford to lose. That’s a rule always to follow very strictly in the Bitcoin space.
Always be careful about the storage of your coins. It means : backup and secure your biggest stash if you want to be safe. Non-experienced people will find it risky (no insurance from a bank etc.) but others will find good to be able to get rid of banks !
Is Bitcoin legal ?
In many countries, usage of Bitcoin is completely legal (US, Europe, Japan…). But some countries are against Bitcoin and it is forbidden to use them there : Bangladesh, Ecuador and Indonesia are famous examples. Other countries are showing bitcoin non-friendly attitude like China and India. Always check your country laws before using it.
You can have many more informations about Bitcoin at bitcoin.org
Here is a video from them :