What are Bitcoins?

Over the past few weeks the talk about bitcoins has been taking importance and almost every media publication is talking it. Some people are looking at it as the future of ecommerce, while others are pessimistic and think it’s just a bubble. So, what exactly are bitcoins and how you can also use them?

In most simple words, bitcoin is a digital currency that you can actually use to make worldwide, payments, buy and sell goods and services. The following video does a great job of explaining how bitcoins work:

Below are a few important points about bitcoins:

  1. It’s a decentralized digital currency, which means that there is no central authority and anyone can use it. The coins are transferred from person to person over the network, without the need to go to a bank or any central exchange.
  2. The transaction fees for the payments are very low and can be used in every country.
  3. There are no prerequisites or arbitrary limits to use bitcoins.
  4. Bit coins are available as a free software. You choose a bitcoin wallet and install it on your computer or mobile. A bitcoin address is generated that you use to pay or receive payments.
  5. When you sell something, you can receive a payment in the form of bitcoins at your bitcoin wallet address. You can also buy bitcoins.
  6. New bitcoins are created through an automated system through servers called bitcoin miners.
  7.  The total number that can ever be mined is limited to around 21m.
  8. Through exchanges, bitcoins are bought and sold against real currencies such as US dollars, British pounds, and euros.
  9. The price of a bitcoin can increase or decrease unpredictably.
  10. Based on your jurisdiction, you may have to pay taxes on your bitcoin income and sales.
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