How Bitcoin Works

Bitcoins are a decentralized form of cryptocurrency. This means they are not regulated by a financial institution or government. As such, unlike a traditional bank account, you do not need a long list of documents such as an ID card to be able to create what is known as a Bitcoin wallet. A bitcoin wallet is what you will use to access your bitcoins and send bitcoins to other individuals.

How to set up an account

You can acquire a Bitcoin wallet from a Bitcoin broker like Coinbase. When you open a wallet through a certified broker, you are given a Bitcoin address, which is a series of numbers and letters, similar to an account number for a bank account, and a private key, which is also a series of numbers and letters that serves as your password.

How Bitcoin works as an anonymous payment processor

You can do 3 things with bitcoins, you can make a purchase, send money anonymously to someone or use it as an investment. More and more merchants are accepting Bitcoin as a form of payment. By using bitcoins instead of cash, you are essentially making this purchase anonymously. The same goes for sending money, based on the fact that you don’t have to send a mountain of payments to create Bitcoin anonymously, you can essentially send money to someone else anonymously.

How Bitcoin Works as an Investment

The price of Bitcoin fluctuates from time to time. Just to put things into perspective, at the beginning of 2013, the average price of Bitcoin was approximately $400 per Bitcoin, but by the end of 2013, the price of Bitcoin had risen to over $1000. This meant that if you had 2 bitcoins worth $800 at the beginning of 2013 and held them as an investment until the end of 2013, those two bitcoins would be worth over $2000 instead of $800. Many people hold bitcoins due to the fact that their value fluctuates.

Bitcoin casino and poker sites

Because of Bitcoin’s anonymity, the gambling industry has adopted Bitcoin as a payment method. Both bitcoin casinos and bitcoin poker sites come alive and offer their players to make deposits, play with bitcoin at the tables and withdraw directly to their bitcoin wallet. This means there are no taxes or opportunities for government control. Like a regular casino in Nevada where you don’t need to register anywhere and all your transactions are anonymous.

How do you send bitcoins

To pay for goods and services or send bitcoins to an individual, 3 things are required. Your bitcoin address, your private key and the individual’s bitcoin address. From now on, you will put 3 pieces of information through your bitcoin wallet, which are: input, balance and output. The input refers to your address, the balance refers to the amount of bitcoins you will send, and the output is the recipient’s address.