I’ve heard of a lot of synonyms for currency, but “bitcoins” was a new one to me.
Although bitcoins (BTCs) have been around since 2009, they are something I’ve just recently learned about and am really struggling to understand.
Bitcoins cannot be held or touched. They are a purely digital international currency (though the IRS recently defined bitcoins as ‘property’ rather than ‘currency’ for our country’s purposes).
Transactions are made with no bank involvement or middlemen, and as such are mostly unregulated. Transactions are limited only by the number of vendors who will accept the currency, which happens to be a growing number. BTCs are an attractive form of payment for many shops because transaction fees are often very low, or even non-existent, as compared to the fees that credit card companies charge.
So how do you access bitcoins? According to an article by Sunny Freeman in the Jan. 26 edition of the Huffington Post, it’s through a process called “mining.” The “mining” concept is similar to digging for precious metals. Instead of using pick-axes, however, bitcoin miners solve complex math puzzles to ‘dig’ for the BTCs. Miners must use a variety of computer programs to solve the intricate math problems, in turn releasing more BTCs into circulation. No more than 25 bitcoins can be mined world-wide for every 10 minutes, helping to limit the supply.
Currently there are about 12,600,000 BTCs in circulation, with a threshold of 21 million. The last of the coins is expected to be mined in 2140, according to the Huffington Post article. As of April 2, the approximate value of a single BTC is about $432 USD, meaning BTCs must be able to be “broken down” into smaller denominations to pay for less expensive items, much like a dollar bill.
If you possess bitcoins, they are stored in a virtual ‘wallet’. The wallet is a digital bank account, allowing users to send or receive bitcoins, pay for purchases, or store their money. More than 1.4 million wallet accounts exist. A consumer wishing to buy something with bitcoins sends money to the seller’s wallet address, which might look something like “1JArS6jzE3AJ9sZ3aFij1BmTcpFGgN86h.”