If you’re wondering how to buy and sell digital currencies like bitcoins, then you’ve come to the right place. In layman’s terms: bitcoins is a virtual currency. That is a fairly simplistic idea: it is not just an inedible monetary element stored in a digital wallet, such as your bank account or credit card. Rather, it has no physical component, such as paper bills or coins (although the more popular image of a real coin, above, is an image created by a currency enthusiast – the image isn’t actually a coin, but a representation of one).
In order for a transaction to occur, two independent sets of information must meet. The buyer (the person sending the money) and the seller (the person receiving the money) both agree on how much they wish to pay for a transaction. At this point, the buyer’s private key (also known as their password) is transferred into the seller’s public key, forming a new address for the transaction. On the other end, the seller’s private key is transferred into the buyer’s private key. Finally, after being confirmed by the network, both parties confirm their transactions using a software program that authenticates both addresses and sends the transaction details back and forth between them.
Unlike conventional money, which can be sent virtually anywhere in the world, bitcoins are only accepted at specific locations. For instance, a user who wanted to purchase a cup of coffee at Starbucks would not be able to use the coffee shop’s automated system to complete the sale because of their location. Transactions like this would require the presence of a merchant account. Similarly, businesses that accept deposits from buyers and allow for the spending of these funds usually do not have the ability to process electronic transfers, such as those done with bitcoins.
This isolation of the currency system is one of the chief attractions to the bitcoin system. As it stands now, traditional money is controlled by banks that process transactions on a massive scale. While these institutions may be able to influence the supply and price of the currency, there are no current plans to alter the way that they operate. Because of this, many individuals and small businesses cannot participate in the monetary system that has been developed by these large scale commercial establishments. With a bitcoin system, anyone who wants to engage in the buying and selling of goods or services can do so without having their financial activities limited by these institutions.
Another reason why this form of exchange has become so popular among individual users is because it allows for easy tracking of transactions. Because all transactions are processed through the same network, there are no additional fees that are based on the individual locations where the transactions are processed. Because the bitcoin system is a globally trusted one, it is free from the volatility that often occurs in traditional currency exchanges. The entire transaction fees are derived from the transaction fees of each individual user, and no one institution controls the pricing of the currency that is traded. Because everyone has access to the network, there are no transaction fees that are paid to third parties.
Because all transactions are processed in this manner, the risk of hacking is eliminated. Even with a bank account, anyone can be the victim of hacking. Transactions on the bitcoin system are secure and there are no trading fees associated with these trades. In fact, some economists argue that the lack of transaction fees reduces the opportunity for hackers to profit from the theft of personal information.
Because many individuals are familiar with how to check a bank account online, they can move funds in and out of their wallets easily using a standard internet browser. A user does not need to know how to move funds through a peer to peer network. The bitcoin wallet was designed to provide easy access to its users. The addresses containing the bitcoin transactions are generated automatically when an account is created.
With the introduction of the bitcoin system, it is now possible to conduct all types of business on the internet. Individuals who want to start a new business or send a payment to another person can do so without having to depend on a financial institution. This means that they do not have to rely on the bank to act as an intermediary. If you have an account at a conventional bank, you can use the same address as your bank to send the payment. However, this option costs the bank money, which hurts the economy. The new block chain technology solves this problem by minting new addresses containing a new transaction fee.