What is a Bitcoin?
Bitcoin is a digital currency, one that is not controlled by any government or organization. Instead of going through a bank, a bitcoin can be sent from me to you or anyone else in the world almost instantly with no fees. There is no bank, credit card company, or middle man for you to go through in order to complete a transaction, just a direct payment from one party to another.
When the Internet was created, it gave people the freedom to share ideas and spread information. Bitcoin is changing the way we use money the way that the Internet changed the way we use information.
Where Does a Bitcoin Come From?
A bitcoin is essentially a “block” of complex problems that are solved or “mined” by a computer’s GPU, and therefore can be created by anyone. Miners collectively dedicate their computers to work around the clock to solve these problems, creating bitcoins in blocks of 25 and shared between the miners who found them. Don’t get excited about creating free money yet, in order for this to be profitable many miners build or buy “AISCs” that are energy efficient machines built solely to mine. Chances are that unless you own one of these, bitcoin mining is not profitable enough to get into.
What’s So Great About It?
As time increases the difficulty for bitcoin to be mined increases, resulting in it entering the market a predictable rate. Unlike the Federal Reserve’s system of controlling how much money enters circulation when it sees fit, a predictable amount of bitcoins will enter the market at this rate which will eventually reach 21 million by 2140 from today’s 10 million.
Bitcoin transactions are encrypted and secure, easy as scanning a QR code from a smart phone or sending from a wallet on your computer, and don’t require large fees like banks and credit cards.
Since it is traded in a market, its traded by supply and demand which affects the price. Over the past six months, its value has gone from around $8 to about $100 at this time of writing.
Where Do I Keep It?
Instead of keeping your money in a bank that likely charges you fees, your coins are stored in a digital wallet that can be used in a desktop application, stored on a USB drive, or put in an online wallet. A desktop application will display the amount of bitcoin you own in any currency you wish, recent transactions, options to send/receive funds, and even current exchange rates. You can create separate wallets that represent whatever you want such as petty coin, savings, or coin you’re setting aside for vacation. A common practice is to have a small amount of money you will use in the near future in your desktop wallet while keeping savings on an encrypted USB stick that you can access on any computer with your authentication. You can put the money you want to use in public in an online wallet so you can simply scan QR codes to send payment.
Where Can I Get It?!
Since bitcoin is still in its early stages an unfortunately annoying to get with the lowest fees possible.
The cheapest current process is linking your bank account with Dwolla, an online service that allows you to send money to other people and services. You will need to authenticate who you are with them using a drivers list and confirm your bank. Once your bank is confirmed, it will take a month before you are allowed to transfer funds to the bitcoin exchange, Mt.Gox. You will also need to authenticate who you are with this website by presenting your license and a picture of a recent utility bill with your name on it. This can take an undisclosed amount of time to be authenticated from the Mt.Gox staff. Once you’re through this process and have money ready to trade, there is at most a .6% fee.
The fastest way to receive bitcoin is through bitinstant. You can take your cash to a CVS/Walgreens, Walmart, or any other store they list and can have bitcoin sent to your wallet in under 30 minutes…at a price, usually about 12%. Expensive but you get what you need quickly.
The best way is through me, where I give the best of both worlds. I can accept your payment in the form of cash, Paypal, or Square transaction and have money sent to your wallet within one business day for a 6% fee on transactions under $500 and a 4% fee for anything over that. I will write you a receipt via email and confirm when funds have been sent.
There are other ways to get bitcoin, through my six months of experience they are the fastest, cheapest, and safest options. If you are worried about what you are losing in fees, there isn’t much to worry about. Bitcoin often fluctuates and you could have your money back in minutes. Over a period of two weeks, my investment of $192 went to $600, more than doubling my initial investment.
I Still Need Some Convincing…
Bitcoin is in its early stages and still has a few hurdles to overcome in order to become successful, but it has already come a long way. Its value has consistently increased and is becoming more and more adopted by online and local businesses. Many economists are predicting that if bitcoin is able to overcome these hurdles and become just 1% of our global GDP, 1 BTC could be worth in the $100,000s to $1,000,000s.