Introduction to Bitcoin

Bitcoin is a currency like the Dollar or the Euro. It shares most features of standard currencies and it has some major differences that made it so popular during the last few years.

How does it work?

First of all, Bitcoin works with numbers. If you make an account or a money transfer there is no such thing as Mr Jones transfers money to Mrs Smith. Instead, you have 534857203946750259729 transfers money to 85723049573095971402.

Now, when you download the Bitcoin software you immediately download all the transactions ever made. That happens to everyone who uses Bitcoin. So instead of trusting a central bank that verifies that X transfers money to Y, you get the same by having all users in the network agreeing to that transaction.

When you make a new transaction, you wait for a few minutes until your transaction is broadcasted to everyone in the network.

The practical advantage from this feature is the fact that no one can tamper or control or stop Bitcoin. If any authority from around the world wishes to stop Bitcoin, people from other parts of the world who share the common database can continue its existence. If someone in the network wishes to hack the data, thousands of other uses will agree between themselves and not with the hacker, so the system retains its integrity.

Is Bitcoin a serious currency?

As long as there are people using it for real world goods or services, yes it is a serious currency. In fact, you can find many types of services from individuals or companies that are willing to exchange them for Bitcoins. You may also find many types of tangible goods. Bitcoin is expanding very fast and the more it is used by people the more goods and services will enter its ecosystem.

But Bitcoin is used in illegal transactions

Indeed it does. Dollars are also used in illegal transactions, Euros as well, Pounds too etc etc. The fact that Bitcoin transactions are anonymous give a significant advantage to illegal transactions, but the exact same advantage is given by using cash in regular currencies. So, the argument that Bitcoin unethical because it is used in illegal transactions is worthless.

But Bitcoin is extremely volatile. What if there is a bank run?

Indeed, the Bitcoin exchange rate can go up AND down very fast. But as volatile as it may be, it has a safety net. There are many people who lost their account numbers, just as there are people losing their passwords. This means there is a significant amount of money trapped inside the Bitcoin market. That is the safety net that no market crash or bank run can beat.

How do I make Bitcoins?

You can create or acquire Bitcoins:

1. You can use software or hardware that mine Bitcoins.

2. You can exchange money, goods or services with people who already own Bitcoins.

Look both of them up in a search engine. There is tons of information out there.

How do I buy or sell Bitcoins?

There are two ways to exchange regular money with Bitcoins:

1. Exchange them with individuals whom you can find in person or via the internet (LocalBitcoins).

2. Exchange them in Bitcoin markets.

Is Bitcoin legal?

Until now, only one country has called it illegal, one other country has recognized it as a valid currency and the rest of the world simply ignores it. So it is legal because it is a virtual entity just like many others on the net.

When you exchange goods or services for Bitcoin is like you exchange them for Candy Crush lives. If exchanging anything for Candy Crush lives is legal, so is for Bitcoin.

How the hell is Bitcoin relevant to this programmers' blog?

Bitcoin is only the start of a new era of virtual currencies. Learning about Bitcoins will give you a considerable advantage and set the foundation for many similar software that already exist or others that will follow in the future.