If you're entirely new to bitcoin, welcome! If you've heard of bitcoin but still have some lingering questions, you're not alone. This article will delve into some commonly asked bitcoin questions, and provide links to further reading if you'd like to learn a bit more.
What is bitcoin?
Bitcoin is a new type of currency that is stored and spent entirely on the internet. Like traditional currencies, such as the US Dollar or Euro, bitcoin can be easily used to purchase goods and services or sent to friends and family anywhere around the world.
How do I get bitcoins?
Just as you might visit an airport currency exchange counter to change US Dollars into Argentine Pesos before a trip to Buenos Aires, you can now visit any number of bitcoin exchange websites to convert any amount of your national currency into bitcoins.
Once you've purchased your bitcoins, they will typically be deposited in a bitcoin wallet account (comparable to a traditional bank checking account), that can be used to make purchases or send funds.
How do I spend bitcoins?
Everyday, more and more retail stores and websites around the world are accepting bitcoin as a standard method of payment, alongside cash and traditional debit and credit cards. By way of example, purchasing a cup of coffee at a local café can be as easy as having the cashier scan your phone's bitcoin wallet app (just as today they might swipe your debit card). Once your wallet has been scanned, the amount owed is immediately deducted from your bitcoin account's balance.
How do I send bitcoins?
Today, there are a variety of ways people send each other money. If you have a bank account you can probably send a paper check, a wire transfer or a money order (providing your recipient also has a bank account). If you don't have a bank account you might be limited to sending cash via a money transfer provider like MoneyGram or Western Union.
Bitcoin is different. Bitcoin transfers are "peer-to-peer", which means, in contrast, they do not require a bank or other payment processor to be successfully sent. When you send a bitcoin payment to a friend those bitcoins are nearly immediately withdrawn from your account, and deposited in theirs. This allows for very inexpensive and very quick money transfers, anywhere in the world, without the need for a traditional bank account.
Who controls bitcoin?
The short answer is no one, actually. Bitcoin is often called a "decentralized currency" as by design, no single person or government controls the underlying rules that govern how new bitcoins are distributed, purchases are made, transfers are sent and transaction records are stored.
Where do new bitcoins come from?
This is perhaps the single most common question people have about bitcoin. The answer is actually somewhat complicated, and is best addressed on its own in a separate summary.
There is, however one key fact worth discussing here before digging in.
You may have heard that the total number of bitcoins that will ever be in circulation is capped at 21,000,000. This is true! But why?
Think about it in comparison to one of our oldest currencies, gold. If you have 1 oz of gold today, whenever new gold is mined from the ground, your 1 oz of gold becomes a little bit less rare, and potentially a little bit less valuable. This phenomenon becomes even more severe when talking about government-issued currencies, which when printed in massive amounts, can quickly lose their value.
Bitcoin addresses this concern by mandating that there will never be more than 21,000,000 bitcoins in existence, and thus never the risk that someone might one day introduce a bunch of new bitcoins that would devalue the ones you own. In addition, until we hit that 21,000,000 bitcoin cap, the number of new bitcoins entering circulation will be introduced at an even and predictable pace.
Is bitcoin secure?
Like any type of money, it's important to take a few common sense steps to ensure your bitcoins remain secure. Click here to learn more about bitcoin security.
Why does bitcoin need to exist?
First and foremost, today Bitcoin is helping provide inexpensive access to basic financial services to the billions of people worldwide without a bank account. With bitcoin, you need only a mobile phone to be able to open a bitcoin wallet. From there you can begin buying bitcoins, making purchases and sending money as you would with a traditional bank debit card.
Additionally, if you reside in a country with a relatively volatile national currency, bitcoin has the potential to grow into a stable way to protect your long-term savings from unpredictable currency fluctuations.
What do I do now?
Bitcoin is admittedly early in its adoption, often with significant swings in value on a daily basis. That said, many people are using a small amount of their savings to buy as little as a fraction of a bitcoin, with the goal of seeing its value appreciate over time. If you're interested in learning more about bitcoin, click any one of the links below, or to sign-up for a Xapo account (and receive 50 bits free) click here.