What is bitcoin?
What is bitcoin – an overview
Bitcoin is a digital currency, which enables sending payments almost transaction-free to anyone with internet access: 'Payment as easy as sending an email', without country borders.
In fact, bitcoin is three things at the same time:
- A currency like the Euro or U.S. Dollar for payments, with a fluctuating exchange rate,
- a store of value like gold, silver or other commodities,
- and a decentralised, peer-to-peer payment network to process bitcoin transactions.
How many bitcoins exist?
The quantity of bitcoins is limited by design. Currently, there are roughly 17.5M bitcoins in existence. New ones are minted every day as reward for the computers providing the bitcoin network. However, the total number of bitcoins is capped at 21M and will only be reached in the year 2140. The limited quantity makes bitcoin inflation-proof as its properties resemble precious metals like gold or silver – very different from currencies like the Euro or U.S. Dollar ("fiat"), which are created by central banks.
How much is a bitcoin worth?
Currently, 1 bitcoin is worth €3,184.56 (source: bitcoinaverage.com). The price is driven purely by supply and demand, and bitcoins are traded on many exchanges 24/7 all around the world against all major currencies. As the quantity is limited, additional demand for bitcoin causes the price to rise. However, this is not a problem if you want to pay smaller amounts: Bitcoins are easily divisible and could also be quoted in mBTC (milli-bitcoin, 1 mBTC = 0.001 BTC = €3.18).
What can you do with bitcoins?
First, bitcoins can be exchanged between any two individuals all around the globe: If you want to pay someone in Asia or South America with internet access, you can do this instantly and nearly free of charge with bitcoin. Second, bitcoins are expected by more and more merchants world-wide, and is particularly useful for micro-payments. You can find a list of bitcoin accepting merchants at bitcoin wiki, or find bitcoin accepting local businesses at coinmap.
How do you store bitcoins?
To store bitcoins you need a digital bitcoin wallet, similar to an email provider for email. Bitcoin wallets hold your bitcoins, and also enable you to conduct transactions. You can use web wallets, mobile wallets on your smartphone, or desktop wallets for download onto your computer. You can find an overview of wallet providers at bitcoin.org. While bitcoins itself are secure, they can get easily stolen if someone can get access to your wallet or if your system is compromised, so please use secure passwords and keep your system up to date.
What are other features?
- Low transaction cost: Bitcoin transaction fees depend on various factors, but are generally about €0.05 per transaction – irrespective of the transaction size. Fees are attributed to the owners of computers in the bitcoin network.
- Anonymity: Bitcoin payments are not anonymous, but "pseudonymous". Transactions are transparent, but your identity cannot be tied to your bitcoin wallet, unless you disclose both at the same time.
- Irreversibility: Bitcoin transactions are irreversible, which means you need to contact your counterparty directly in case of mistakes or overpayments.
- Fast confirmation: It takes roughly 10 mins to get the first transaction confirmation from the bitcoin network. If you expect to receive a large bitcoin amount, it is advisable to wait for more confirmations.
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