Monday, December 2, 2013

Introduction to Bitcoin and other Crypto-currencies

I have recently explained the concept of a virtual currency to my family and friends many times over the last few weeks. People really do not understand crypto-currencies. Here is a simple guide to get you started.
By CASASCIUS. I hereby release this work into the public domain. Casascius (talk) 22:36, 18 November 2012 (UTC) (CASASCIUS) [Public domain], via Wikimedia Commons

1. Bitcoin is the most popular crypto-currency at this time. It is a virtual currency that only exists "online".

2. Bitcoins can be obtained by buying (or trading) with other people, usually through an exchange or by mining them. If you buy a bitcoin, you must store it carefully. You can download a digital wallet to hold your bitcoins.
     Popular exchanges: coinbase.com (easy to buy, not technically an exchange), bitstamp.net, mtgox.com, btc-e.com

3. There are only a finite number of bitcoins possible (21 million) and most of them already have been mined. The remaining bitcoins will be mined over the next 30 years and then mining will cease.

4. Bitcoin mining is alot like mining for gold or diamonds. It is no longer for amateurs. You need a lot of expensive specialized computer hardware and there is serious competition. With the right expertise and low electricity costs, it can be profitable but it is not easy.

5. Bitcoins have value (currently about $750 each), however, they can not be easily used to purchase goods and services at this time. They can be used to buy gift cards on gyft.com to major retailers. They can be converted into many currencies on the exchanges mentioned above.

6. There are many other virtual currencies besides bitcoins. They can be converted to and from Bitcoins on the exchanges.

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