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Beginner's guide to Bitcoin

bitcoinEver wanted to learn more about Bitcoin? If the answer is affirmative, you will be glad to find out that this article will teach you all the basics - in great detail. Let's get started!

Apparently, Bitcoin was invented by people who weren't pleased by the way in which the big banks misused their clients' money. These people wanted to create a decentralized, 100% honest way of controlling their own money.

Bitcoin is now used by many big companies in the world; you can utilize it to purchase cars, software, and so on. Any Bitcoin transaction is irreversible; once that the virtual currency has left your account, you can't get it back. And when people send you Bitcoin, they can't get refunds either. This may be useful to some people, but may prevent others from using virtual currencies, because they won't be able to get their money back, in case that they get scammed.

As you know, banks utilize unique accounts to manage your money; similarly, bitcoins can be sent and received using unique digital wallet "addresses", which include random sets of symbols that have approximately 30 characters. Bitcoin addresses are almost impossible to track, so they are often used by many cyber criminals to get their activities financed.

On the positive side, transactions are almost instant; virtual currencies will reach their destination within minutes. More than this, since transactions are encrypted using a strong private key that is utilized in conjunction with a public key, it is virtually impossible to steal cryptocurrency from another person's account.

Unlike banks, Bitcoin doesn't rely on a central monitoring authority. Instead, it utilizes a peer-to-peer computer network that is made out of its users' computers, validating each transaction, and thus making sure that people can't spend more money than what they have in their virtual accounts. If you've heard about torrent-based file sharing services before, you know that each person who utilizes them needs to install an application on his/her computer, and then can share the downloaded files with the entire world. Bitcoin uses a similar technology to create that huge, anonymous, peer-to-peer network.

Bitcoins are "mined", being created by computers who utilize complex math formulas to generate them. It was much easier to mine bitcoins ten years ago; they are much harder to find these days, because the total amount of this virtual currency is limited to about 20 million. So, no one can flood the market by "printing" lots of bitcoins.

People can mine bitcoins, or they can buy them from several places. There are many cryptocurrency exchange portals where you can purchase fractions of bitcoins (satoshis) for real money. You can also get bitcoins by accepting them as a payment for your products or services.

To sell your stuff to a person and get bitcoins for it, you will need to get that person's private key, which includes the amount of money and the address of his/her digital wallet through email, SMS, and so on. By installing a dedicated application and scanning the received key, the satoshis will be added to your account within minutes. All the anonymous computers that are part of the Bitcoin network will acknowledge this transaction as well, so the buyer won't be able to scam anyone by pretending that he/she has the same amount in his/her account after the transaction.

Working with digital currencies can be very rewarding, but there are some things that you should know if you want to protect your money. So, be sure to keep small amounts of virtual currencies in your digital wallet. I know that you may dislike banks as much as I do, but we'll both have to admit that they are much safer places for our funds, at least for now. The alternative is to create two wallets, and then keep one of them off-line most of the time. Just go online for a few minutes, until you transfer the funds from the first wallet to the second one, and then disconnect the application that manages the second wallet from the Internet. By doing this, your digital currencies should be safe.