How does bitcoin work
Want to know how bitcoin works? Discover who uses bitcoin, where you can spend your bitcoins, whens the best time to use them, and how to store your bitcoin.
The Short Explanation of Bitcoin:
The Bitcoin (BTC) is a virtual currency, created by a slow computer process called mining. Yes, I said mining, like the coal miners from back in the day. In our traditional monetary system, the government prints money when they need to, but in Bitcoin and Cryptocurrency, money is discovered. Anyone with a computer can become a miner, and discover bitcoins.
Take a minute to imagine yourself as a coal miner digging away. You are using all your power and might to hash at the coal to discover these diamonds. You are excited because, once you get the diamonds you can buy things with it, you can trade it, or you can keep it. This is the same concept as bitcoin and cryptocurrency. Your computer is the “Miner” and the Bitcoins / Cryptocurrency are the diamonds it is looking for. Now imagine you are in a coal mine with 50 other miners. You guys are all looking for diamonds. In bitcoin, computers around the word are mining for coins by competing with each other. Every time someone successfully creates a hash, they get a rewards in bitcoins, this big record book called the blockchain is updated to keep track of payments and everybody at the coal mine hears about it. You want to keep mining because you get paid to mine.
Many people are constantly asking me, but where does the actual money come from? Like how can I spend these virtual bitcoins that I mined. How much is it worth? Where are the coins stored at, when can I trade them in for real cash, and who else is using bitcoin? These are all great questions. I’m going to run through them real quick.
Where does the actual money come from?
- You can mine it with computer (bitcoin mining)
- You can buy some from people who have already mined it ( like from an online currency exchange)
- You can do a trade by inserting your cash into a bitcoin ATM and receive a digital wallet slip with the bitcoin amount
- You can accept bitcoin and people can send you bitcoin payments ( through a digital wallet like paypal)
- You can earn bitcoins by doing tasks on websites or working from someone
Who uses bitcoin?
Personally, I use this as an opening conversation at parties or when I meet new people. Do you know about Bitcoin? Have you ever used or brought things with bitcoin? Honestly, you would be surprised. You would never really know who is actively using it or knows about bitcoin unless you ask.
- Your neighbors
- Millions of people across the globe
How can I spend my bitcoin or cryptocurrency?
- More than 20,000 retailers online accept bitcoin. Popular ones are: Overstock.com, Target, CVS, Victoria Secret and more
- Many Local Restaurants, Bars and Cafes accept bitcoin (just ask)
- Bitcoin Debit and ATM cards are coming out for your online wallet. Use that to spend your coins. (like the paypal debit card)
How much is my bitcoin worth?
Like most currencies, bitcoins value is backed by supply and demand. Nothing physical. The value is usually based around the current price of recent trades… or in short… what the coin is currently traded for on the market. Remember, bitcoin is only ONE type of cryptocurrency. There’s a zillion other types that can be brought, sold and traded on the market. Check the current market prices here:
Where are the Bitcoins stored?
- store them in a online digital wallet (like an online bank similar to paypal)
- store them on a desktop wallet (software on your computer)
- store them on a hard drive or usb flash drive
- store them on a mobile waller (phone app)
- most popular and cheapest option is the paper wallet
When can I trade my bitcoins for real cash?
Once you get the bitcoins, you can trade them in at anytime for real cash.There are a ton of options for this.
- You can cash out from your wallet to your personal or business bank account (Chase, Wells Fargo, Etc.)
- You can cash out at a Bitcoin ATM
- You can sell bitcoin in person and get the cash from the buyer
- You can trade online on p2p networks / exchanges and cash out to your bank
I hoped this helped you get an understanding of how bitcoin works a bit better. If you need more information, I would be happy to help answer any questions you have. Please tune into Coin Cutie TV on youtube or the best news and product reviews on bitcoin and cryptocurrency.
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