Bitcoin is a type of currency also known as a cryptocurrency, which is like the US “Gold Standard” currency, but works like its own internet and is the world’s first free market not controlled by any central body. Bitcoin is a decentralized global currency. Bitcoins can be exchanged for other currencies and or goods or services and be used to buy and sell.
Bitcoin should be thought of in layers since it offers much more than standard currencies.
Bitcoin is a form of virtual currency, created in 2009 by an unknown person using the alias Satoshi Nakamoto. With Bitcoin you can buy goods or services using this currency as you would with dollars or euros, as long as the seller accepts bitcoins. Bitcoins are used for electronic purchases and transfers. Every single purchase is immediately logged digitally on a transaction log that tracks the time of purchase and who owns how many bitcoins. This way every transaction is 100% transparent giving more safety to the whole process. A popular question is will people know how much I am spending and on what? The answer is No. Each and every transaction is recorded in the public log, and the names of buyers and sellers are not revealed – the only information available is their wallet IDs so the transactions are kept private.
The reasons for using Bitcoin are simple. It’s an extremely fast payment method which, much like the credit card payments are performed immediately. Since there is no central bank or institution with control over this industry Bitcoins are controlled by its community and, for good and for bad, it is completely decentralized.
Finally, a major advantage is the security aspects of Bitcoin. It is 100% owned by you, meaning no one can “freeze your account” or access your bitcoins or tell you what to do with your Bitcoins. Each transaction has two pieces of data: a public key, and a private one. Anyone can see the public key (your bitcoin address) but your private key is secret and is only known to you. When you send a bitcoin, you ‘sign’ the transaction by combining your public and private keys together, and applying some clever maths to them. This creates a certificate that proves the transaction came from you whist remaining anonymous. This is different from the traditional credit card transaction, where you need to provide your card number, expiry date and CSV number.