What is a Bitcoin?
Bitcoin is one of many new cryptocurrencies, and you may ask, what is it and why is hot?. Let us explain it to you:
In the physical world (everything we can touch), we use money as a currency in order to pay for things. Many many years ago, different civilizations used various items as currency like silver, gold, cattle and even shells!
Now on the digital world, we have cryptocurrencies, think about it like gold stored on servers…
In this digital world, I can give you one bitcoin and as soon as you grab it, is no longer mine, and later on you can give save or give it to someone else, more on this is in a bit.
Where does Bitcoin comes from?
Lets continue with the gold analogy. On the internet there are mines (computers) that are constantly mining for gold (solving complex problems) in order to generate more and more gold for constant demand.
How Bitcoin are controlled?
Well, since this is a digital currency, anyone could counterfeit it, in example: I have 1 Bitcoin and I want to buy an apple from Paul, I could copy my Bitcoin and save it somewhere safe and give Paul my Bitcoin. Now Paul has 1 Bitcoin and I have 1 Bitcoin and 1 apple…
Well, this isn’t the case with Bitcoin! How did Bitcoin solved this? Well, in order to control the amount of Bitcoins, there has to be a journal with the information of how many Bitcoins currently exists.
But, if there’s only one journal, everyone would need to go to the person who controls it in order to do transactions with bitcoins. Instead of this, bitcoin made this journal public made several copies of it.
Who them control this journals? Well, all the miners control a copy of the journals and they are all identical, therefore, there’s no possible way to cheat system!
What determines the price of Bitcoin?
Simple good old law of supply and demand. Bitcoins are not infinite, there’s a finite quantity and as demand rises, the price rises with it. And you may ask, who can possibly use a digital currency to pay for goods? Japan! yes, Japan has allowed Bitcoin as a legal method of payment, and soon Russia will follow.
How to trade Bitcoins
If you are interested in trading bitcoins or another digital currency, here at The Investing Loon use QuadrigaCX because of their low fees and the fact that we can use canadian dollars to fund our account. If you register using our referral you will help us since we get a little commission from QuadrigaCX for every referral which comes handy to pay for our servers!