What is Bitcoin? Bitcoins are digital cryptocurrency that is used as an alternative paying method apart from the normal money like US dollars or commodities like gold and silver. Bitcoins are sent through the internet and every transaction is processed by many independent personal computers which are all linked through a Bitcoin mining software. Anyone can get involved into this transaction processing.
But why would anyone use their personal computer to process these payments? That’s because every transaction is made of a complex mathematical problem and whichever computer solves the problem first, gets rewarded with bitcoins. So this makes it kind of a lottery between miners but with the advantage for those who have more high-end computers. This process is called mining and that is the only way how bitcoins are created. Bitcoins are awarded at regular intervals every 10 minutes on average. Every four years the amounts of bitcoins that can be mined are decreasing by half. First four years starting from January 2009 there were ten and a half million bitcoins mined. Next four years – around five million bitcoins and so forth. The maximum amount of bitcoins that can be mined is 21 million, and it is estimated that the last bitcoins could be mined around year 2140.
There are many advantages of paying with Bitcoin. First, there’s anonymity, because paying with bitcoins your name is never registered. Unless users publicize their account addresses no one can trace transactions back to them. There’s no way to implement taxes for bitcoins because there can be no intervention and transactions from a third party. No government, bank or anybody else can seize bitcoins or freeze Bitcoin account because there are numerous copies of the transactions database. So Bitcoin users can spend their money freely in any way they want. One of the main purpose for Bitcoin is to lower the transaction costs and time required to complete them. Although there is some cost and time needed for every transaction because transactions requires users to keep the Bitcoin client running and connected to other nodes they are significantly lower than those charged by banks for both local and international transactions.