By Chris Dato • December 15, 2014
By now, you have probably heard of the online currency Bitcoin. You are also probably pretty confused about everything from where they come from to where you can spend them to what they look like. (Spoiler, they don’t. It is an entirely digital currency) After doing quite a bit of research, I have found the answers to all of these questions. However, in my research, I also found that Bitcoin is a topic that can become confusing and alienating very quickly to those unfamiliar with it, so I am going to focus this article on bringing you the essentials of understanding what Bitcoin is and how it can be useful to you.
What is bitcoin?
First things first, lets explain exactly what bitcoin is. Bitcoin is a type of digital currency, known as a cryptocurrency, which can be used to make online transactions in place of printed currency, such as the dollar. It is not a physical currency, nor does any one body control it. Instead, it has a decidedly decentralized organizational structure, with the currency being produced by people using software that solves mathematical problems. Solving these complex math problems verifies the accuracy of a portion of a central journal of bitcoin transactions.
I know, it is already getting pretty technical… I just wanted you to understand where the currency comes from. Now that you have a basic understanding, lets move on to how Bitcoin affects you. One last fun fact though: a person or group using the pseudonym Satoshi Nakamoto created Bitcoin in 2008.
How do I get bitcoins?
Acquiring the cryptocurrency has become a much easier task as it has become more widely accepted. In the United States, bitcoins can now be purchased by card at a number of different exchange vendors such as Coinbase, Circle, and Trucoin. You can also receive bitcoins as part of a transaction.
To store your bitcoins you will need a digital wallet, which can be thought of like a bank account. There are four types of Bitcoin wallets. Desktop wallets store the digital currency on your computer’s desktop, while mobile wallets give you access to your bitcoins from your phone or tablet. Web based wallets keep track of your bitcoins through an online server, and hardware wallets are kept on an external hard drive.
Security is a slight issue with this form of currency storage, but not in the way that you might expect. While the wallets are relatively protected from outside intruders, the funds are not recorded outside of the wallet. This means that if you lose your wallet or it becomes deleted, there is no recovering the contents.
Where can I spend my bitcoins?
Congratulations, you have done all of the hard work to understand the origins and management of your bitcoins. Time to celebrate by treating yourself to something extravagant, but where can you spend your hard earned new cryptocurrency? The list is getting longer every day.
Most recently, online computer company Dell announced that it would be accepting payment by Bitcoin starting in July of this year. The company, with revenues of $59 billion in 2013, became the largest company to accept bitcoin. Other major companies that take bitcoin include retail giant Overstock.com, DISH Network, and newegg.com.
An exciting new development is that online gift card retailer egifter.com recently announced that it will be accepting bitcoin. This means that you will be able to use bitcoins to purchase gift cards for some of the most prominent brick and mortar retailers, including K-Mart, CVS Pharmacy, Sears, and The Home Depot, as well as Amazon.com.
That wasn’t so bad right? With bitcoin being accepted at so many new retailers each day, it is a good idea to understand emerging currency. As I said, this is just a very shallow delve into the topic, so I encourage you to do your own research if you are still curious.
Chris Dato A Southern California kid born and raised, Chris is happiest with sunglasses on his face and sand under his back. Although a self-proclaimed master money saver, he prefers the term 'responsibly frugal' to 'cheap.'