In an easy explanation, what is a Bitcoin?

Bitcoin and cryptocurrency are the talks of the year. Today, the price of bitcoins has reached over $16,500 per coin from $500 per coin within the past 12 months with the market cap more than $270 billion. Besides Bitcoin, Ethereum, Bitcoin Cash, Ripple, Dash, Litecoin, and NEO are other major cryptocurrencies in the market.

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The growth of Bitcoin has attracted so many new investors from around the globe. But what amazes me is how few people really understand what Bitcoin is all about.

In this article, I’ll try to explain it in a simple language that even a dummy could understand.

So, what exactly is Bitcoin?

Bitcoin is a digital currency also known as a cryptocurrency or virtual currency, built on top of the blockchain technology. Yes, bitcoin is nothing that you can print, touch, feel, or store in your safe or wallet. Bitcoin is virtual. Technically, bitcoins are a bunch of numbers (0s and 1s) stored on a bunch of computers around the world.

Bitcoin is built on a technology called the blockchain. Blockchain is the reason why Bitcoin is so popular. Blockchain is a technology to create, store, and manage digital transactions that are public, secure, and distributed.

Why Bitcoin?

Bitcoin was created in 2009 by an unknown individual or a group named “Satoshi Nakamoto” to provide a way to pay for transactions without a third-party like a bank. The transactions occur between two parties without any middlemen.

There are no transaction fees and both parties are anonymous. When you buy bitcoins, you get a unique digital address that becomes your identity, and that address is used for every transaction.

Some pundits predict that Bitcoin (and cryptocurrency) is the future of money. They say, eventually, the actual physical currency will start diminishing and digital currency will start appearing. Time will tell!

What can I do with bitcoins?

Today, many tech-savvy online retailers accept bitcoins. You can order services like Web hosting, buy merchandise, and even a coffee. Many online shopping carts that accept bitcoins will have an option similar to the following cryptocurrency icons: Bitcoin, LiteCoin, and Dogecoin. Here is an example of DirectNic offering cryptocurrency payment options.

Some known businesses which accept bitcoins include Virgin Galactic, Bedding, Furniture, Electronics, Jewelry, Clothing & more, TigerDirect, Dish Network, Expedia, Newegg, Directnic, Microsoft, Zynga, Starbucks, and Subway.

Why do people buy bitcoins?

If I can buy everything using my credit card then why do I need bitcoins?

Bitcoin is a new form of currency. Some people believe that the value of bitcoins will grow over time once more and more people and businesses start using them. People buy bitcoins as an investment vehicle. As a matter of fact, the value of 1 bitcoin has increased from $500 to $16,000 in the past 12 months.

Some people are frustrated with current banks and financial institutions. They would rather pay via bitcoins.

Bitcoins may also be used to stay anonymous when paying for services and products.