IS Magazine Blog

Understanding The Virtual Currency Of Bitcoins

Mar 18 2014

Bitcoin, bitcoin coin, physical bitcoin, bitco...

Bitcoin, bitcoin coin, physical bitcoin, bitcoin photo (Photo credit: antanacoins)

What are Bitcoins?

They is a virtual currency that allows individuals to conduct business with one another. For example, if you wanted me to conduct a sting operation aimed at a particular political party claiming to eliminate corruption, but in actuality they did nothing to meet this goal, you would need some type of incentive to motivate me. I might be well equipped to ensure this mission is carried out, but still do not want anyone to be able to trace me to this very sensitive operation. Of course, you probably want to remain anonymous as well. What we both would like is a video that is shot in secrecy that we can eventually leak on

How can we conduct business? With Bitcoins!

You could pay for my services using Bitcoins. Why Bitcoins? The reason people like to use Bitcoins is that they are not traceable and you can remain completely anonymous. They provide an ideal way to conduct business with someone else without having to reveal your identities. Additionally, there is no digital footprint, such as a bank transaction or credit card record.

So, let's just say that we are able to come to an agreement on a deal and you send me Bitcoins as a form of payment for my services. I set 3 Bitcoins as the price for my work. At the time of this article, the rate is about Rs 38,000 per Bitcoin, meaning you are paying me approximately Rs 1.15 lakh to handle this operation we have discussed.

Fact: Bitcoin is actual currency and fluctuates in price just like any other currency and can be used as a form of payment for any type of business dealing.

How does the process work?

The genius behind Bitcoin is in how the process works. In order to verify that you actually have the 3 Bitcoins you promised to pay me, both of us will need to trigger the system in order to undergo an extensive verification process. This process involves the entire Bitcoiner community (known as miners). They will need to go through complicated coded algorithms and programs in order to verify that the three Bitcoins you have promised to pay me actually exist and that they are transferred to me.

Miners are paid for their service by earning Bitcoins for executing these calculations. Earning Bitcoins is how new Bitcoins are created and additional currency is put into circulation. These miners are major geeks who have multiple computers surrounding them in some of the most remote locations, especially in areas where electricity is cheap and cool weather is common.

What are Bitcoins? Online Class with Charlie Shrem