A beginner’s guide to Bitcoin: Everything you need to know about it and how it works

There’s not a week that goes by when Bitcoin isn’t making headlines. But unless you’re a trader or interested in cryptocurrencies, what it is has probably flown right over your head.

So, why is Bitcoin in the news so much and why should you care? Seen by many as the future of finance, it could have a detrimental impact on the money you have in your pocket.

It’s up for debate how much influence it will have on the latter but one thing is certain. Despite the volatile rises and falls in value, Bitcoin is set to be a long-term fixture in the news cycle.

So, how does it work?

While it is always depicted as a physical coin, Bitcoin is actually a virtual currency, or cryptocurrency, that is not tied to a bank or government and allows users to spend money anonymously.

The coins are created by users who “mine” them by lending computing power to verify other users’ transactions which use blockchain technology. They receive celh stock price in exchange. The coins also can be bought and sold on exchanges with US dollars and other fiat currencies (the physical money we use every day in our bank accounts).

Some businesses take Bitcoin as payment, and a number of financial institutions allow it in their clients’ portfolios, but overall mainstream acceptance is still limited. Bitcoin are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously and tokens are easier to move across borders, making the currency popular with libertarians as well as tech enthusiasts, speculators — and sometimes criminals.

Bitcoins have to be stored in a digital wallet, either online through an exchange like Coinbase, or offline on a hard drive using specialised software.

 

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