Since its creation in 2009, Bitcoin has become a highly discussed form of digital currency. While there some similarities to traditional currency, there are some distinctly important advantages and disadvantages. Here is a closer look at exactly what Bitcoins are and how they are being used in today’s economy.
Much like state-backed currency, Bitcoins can be used at a number of online stores ranging from clothing retailers to food-delivery services. As more Bitcoins are exchanged and used, their relative worth changes alongside physical currency such as the U.S. dollar and the Euro. The key difference between Bitcoins and stated-regulated currency is the fact that Bitcoins have absolutely no fees or middle-men during transactions. Any party can digitally trade, sell, or purchase Bitcoins without using their real name.
Due to the fact that Bitcoins are not regulated or backed by any major organizations or countries, there are no guarantees about their value and no protection against losses. Typically, they are stored within a cloud server or directly on an owner's computer or smartphone. If the computer is lost due to a virus or the phone is stolen, those Bitcoins are gone forever.
Bitcoins are created through a process that is known as mining. Individuals or a group of people use their computers to carry out complex math problems to digitally create more Bitcoins. Currently, around 25 Bitcoins are awarded every 10 minutes to a select “winner” or group of winners. The winners can then sell their Bitcoins through online exchanges, hold onto their Bitcoins as an investment with hopes that they will go up in value, or use them at their favorite online merchants.