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Bitcoin as Future Currency

If you are a bit lost and do not have the vaguest idea of what Bitcoins are, you are not alone. There are a million people out there who do not know what it is and that it even existed. What you know are the euro, dollar or yen that pays for different services. However, what you may not know is that there’s a virtual currency that may take its place in the financial market. Only that it is in digital form.

What is a Bitcoin?

It is a digital currency created in an open source C++ programming code. It enables low-cost payments and bypasses the need for central authorities and issuers of money. And if you are used to currency notes in paper form, you cannot physically touch a Bitcoin. Instead it is stored in a digital wallet that can be exchanged with an individual or group of individuals who has a Bitcoin address. It can be accessed from practically anywhere as long as there is an Internet connection.

How does it work?

Transactions using this digital currency involve a bitcoin exchange in an online environment which are done via secured servers. The processing is called bitcoin mining. Transactions using bitcoins are confirmed through these servers that are communicated over an Internet-based network. Using peer-to-peer file sharing technology, transactions are periodically updated and archived in ledgers. Newly-minted bitcoins are created with each ledger update.

LBinaryIt is estimated that there were 7 million Bitcoins in existence as of August 2011. However, hardcoding has set the limit for the number bitcoins to be released to only 21 million. Per every update, hardcoding allows for the number of newly-created bitcoins to be halved every 4 years. By the year 2140 the number of bitcoins will then be down to zero and no more will be added into circulation. At that time, it will have reached its maximum number of 21 million.

It may sound like that the number bitcoins are likely to run out due to the limits set for its release. To accommodate this limit, each bitcoin is subdivided down to eight decimal places. It results to 100 million smaller units called Satoshis that make up one bitcoin. Incidentally, the bitcoin was developed in 2009 based on the work of Satoshi Nakamoto.
Information on the historical number of bitcoins that have been mined or are in actual circulation is reflected in bitcoin charts that can be found online.

Where are Bitcoins accepted?

The use of bitcoins in the trading environment has progressed over the past two years. It is widely-accepted by many merchants which constitutes some of its commercial usage. It can be used in currency exchanges and real-time trading, purchase bulk/large-sized trades using bank wires from major financial institutions, or the use of gift/debit cards from big consumer establishments, among others.

As with what transpires in financial markets, bitcoins fluctuate with other major currencies and can be converted to and from other currencies. This can be performed at specific online exchange services. Note that transactions are facilitated more quickly in an online environment where there’s an absence of central authorities.

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