{"id":48882,"date":"2014-05-02T00:00:00","date_gmt":"2014-05-02T00:00:00","guid":{"rendered":"https:\/\/www.techopedia.com\/what-the-is-bitcoin\/"},"modified":"2014-04-30T15:52:41","modified_gmt":"2014-04-30T15:52:41","slug":"what-the-is-bitcoin","status":"publish","type":"post","link":"https:\/\/www.techopedia.com\/2\/30111\/trends\/web-services\/what-the-is-bitcoin","title":{"rendered":"What the $#@! Is Bitcoin?!"},"content":{"rendered":"
What other currency garners as much attention as bitcoin<\/a>? Chances are you don\u2019t hear that much about the U.S. dollar or China\u2019s renimbi, but bitcoin news seems to have a certain sex appeal. Is the focus on the virtual currency much ado about nothing or something to keep track of?<\/p>\n The answer is \u2026 it\u2019s complicated. The infant currency is certainly off to a rousing start, but it has a very uncertain future. (Get more background on bitcoin in An Intro to Bitcoin: Can a Virtual Currency Work?<\/a>)<\/p>\n Bitcoin\u2019s name is a bit of a misnomer, as it\u2019s a virtual cryptocurrency<\/a> (bits) with no physical manifestation (coins). But the name sure is catchy. Who coined (ahem) the term bitcoin? Actually, the currency\u2019s origins are somewhat murky. According to bitcoin.org<\/a>, the currency was created in 2009<\/a> by Satoshi Nakamoto, who has since left the project and denies having any ties<\/a> to bitcoin.<\/p>\n There is no Federal Reserve for bitcoins. Nor are there bitcoin banks or backstops like the Federal Deposit Insurance Corporation (FDIC) when a bitcoin exchange (sort of like a bitcoin bank) goes bust. There isn\u2019t a bitcoin mint, as you can\u2019t print something that\u2019s virtual. That\u2019s just not how the bitcoin world rolls. Instead, bitcoins are created (or mined, to be more precise) using computers that also process transactions and secure the network. Bitcoin miners are rewarded with bitcoins for their efforts.<\/p>\n Unlike U.S. currency, only a certain number of bitcoins will be created .. er … mined.<\/span> "Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence," according to the FAQ on bitcoin.org. The magic number is expected to be reached in 2017. (One wonders if there will be a ceremony when the last bitcoin emerges.)<\/p>\n Who uses bitcoins? You\u2019d be surprised. Bitcoins can be used to pay for all kinds of things, including Domino\u2019s pizza. OK, so technically you don\u2019t buy the pie directly from Domino\u2019s. Instead, you buy it indirectly by first placing the order with PizzaForCoins.com<\/a>, which exchanges your bitcoins for good, old U.S. dollars and buys your pizza. It\u2019s cool … but it’s a bit more complicated than just giving the delivery guy a $20 and calling it good. <\/p>\n Discount retailer Overstock.com has been accepting bitcoins since January 2014, and many other online retailers accept it too.<\/p>\n You buy bitcoins on exchanges. The recently shuttered Mt. Gox<\/a>, which filed for bankruptcy protection in Japan in February, was the largest such exchange. It\u2019s not clear if people who had bitcoins in Mt. Gox will get their money back. As of mid-March there were more than 12.7 million bitcoins in circulation with a total value of almost $7.7 billion. Once you have some bitcoins, you can pay merchants via smartphone<\/a> or computer.<\/p>\n Just like a "normal" currency, the value of bitcoins can fluctuate wildly. A bitcoin was valued as high as $1,200 late in 2013; more recently, it’s fallen to about half that. There are numerous sites that track<\/a> the currency\u2019s value.<\/p>\n Bitcoins have a somewhat shady reputation as many governments haven\u2019t begun to regulate them yet, which means that the currency\u2019s use is hard to track, making it ideal for illicit commerce. The FBI shut down Silk Road, an online market, in October 2013. <\/p>\n "In 2012, an academic from the Carnegie Mellon CyLab and the Information Networking Institute estimated that 4.5 to 9 percent of all bitcoins transacted were for purchases of drugs at a single online market, Silk Road," according to Wikipedia. No wonder that market was shuttered by the Feds.<\/p>\n