What is Bitcoin?
The History of Bitcoin
Bitcoin FAQ’s

Bitcoin is digital currency.  Instead of reaching into your pocket or wallet for, quarters or dollars to pay for a product or service, you pay for them over the Internet. Bitcoin exists exclusively in cyberspace.
Bitcoin users don’t write checks or use a credit card, and therefore bypass an intermediary such as a bank in any transaction. What were formerly in-person transactions, person-to-merchant transactions or merchant-to-merchant transactions are now enabled to become peer-to-peer transactions. Merchants who honor bitcoins benefit because they’re spared a fee which customarily runs between one and two percent.

Successive participants in bitcoin transactions are recorded in a public ledger known as a block chain. Each participant is prevented by block-chain software from altering previous bitcoin transactions in any way.

The benefits bitcoin offers through the elimination of the need for banks to clear funds are momentous. In fact, the use of bitcoin eliminates the need for any fund-clearing intermediary. The very nature of bitcoin software prohibits fraud or forgery. What’s more, a digital currency transaction provides a virtual guarantee of user privacy. Also, you need no longer concern yourself with the costs of maintaining a checking account or of returned checks.

The time savings associated with the bypassing of an intermediary, especially in international transactions, could likely prove an immense boon to commerce over the next several years.

Particularly since the Great Recession of 2008, banks – particularly big banks – have become worrisome to depositors. In May of 2015, five of the world’s biggest banks were slapped with criminal charges for rigging currencies. Without much fanfare, all five banks pleaded guilty to the charges and collectively paid $5 Billion in fines.

It is extremely telling that one of these banks, JP Morgan Chase & Co., after routinely dismissing bitcoin as “unimportant” in 2015 has now announced in 2016 “Blockchain [the online technology of bitcoin] will be big in everything related to settlement, and not just loans. While it is still early days, the technology looks very good.”

Bitcoin then is highly significant in the evolution of currency. Clearly, big banks have gotten the message and do not want to be left behind. Enlightened by the new bitcoin technology, they are actively searching for legitimate ways to modernize their operations.

bitcoin History
The History of Bitcoin

In 2008, a man named Satoshi Nakamoto published a paper on the Internet which describes bitcoin software. In 2009, he released the first software to initiate the bitcoin network as well as the first units of bitcoin currency.

Nakamoto has effectively been careful to maintain anonymity – so much so that some have called into question whether the very name Nakamoto represents an individual or a group of individuals.

According to The New York Times, Nakamoto might have been motivated to initiate bitcoin in reaction to the 2008 financial crisis. He posted a note in the bitcoin network’s transaction database which reads “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

Soon afterward, a comment on bitcointalk forums remarked about a purchase of two pizzas from Papa John’s. A bitcoin miner from Florida – Laszlo Hanyecz paid 10,000 bitcoins – the equivalent of $25 – for the pies.

The first bitcoin transaction and the first mobile transaction took place in 2010. On November 10 of that same year, bitcoin’s transactions exceeded $1 million. At this point the value of a bitcoin was $0.50.

In the spring of 2011, BitPay, a large merchant services provider, introduced a smartphone wallet. They also created large Bitcoin partnerships, embracing, for instance, WordPress, Newegg and The St. Petersburg College Football Bowl in “The Bitcoin Bowl.”

BitPay declared in October 2012 that over 1,000 merchants were now accepting bitcoin through its payment processing system. In February 2013, Coinbase, a bitcoin payment processor, announced it sold $1 million worth of bitcoins in one month at more than $22 per bitcoin. The Internet Archive declared it would now accept bitcoin donations and it would offer employees the option to receive a portion of their compensation in bitcoin.

On the heels of new China exchanges and bitcoin miners, the value of bitcoin jumped from US$125 in September, 2013 to over US$1,100 by the end of November in the same year. Subsequently, the market capitalization value of bitcoin went from US$1.5 Billion to US$13.5 Billion in about sixty days.

In October, 2013 Bitcoiniacs and Robocoin initiated the world’s first bitcoin ATM in Vancouver, British Columbia in Canada. The following month, the University of Nicosia began accepting bitcoin for the payment of tuition. In the latter half of 2014, Overstock.com announced it would accept bitcoin. Also in 2014, the D Las Vegas Casino Hotel and Golden Gate Hotel & Casino Properties in downtown Las Vegas began accepting bitcoin.

As a dramatic development in the history of currency, bitcoin has had its share of legal challenges. On August 6, 2013, in Federal Court, the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are a “currency or a form of money”, as defined by Federal Securities Laws, and were therefore subject to the court’s jurisdiction. Also, Germany’s Finance Ministry defined bitcoins as a “unit of account,” a financial instrument (though not a currency) with legal and tax ramifications.

The company TeraExchange, LLC, received approval from the U.S. Commodity Futures Trading Commission (CFTC) in September, 2014, to list an over-the-counter swap product priced in bitcoin. This was the first time a regulatory agency in the United States approved a financial product in bitcoin.

With increasing privacy concerns and the desire for a faster clearing process than what banks now offer, the public will increasingly choose merchants who accept bitcoin for products and services. The Nakamoto legacy – the creation of a digital and decentralized currency not linked to a promise or government fiat – has clearly taken hold.

Bitcoin FAQ’s

What is Bitcoin?

Bitcoin is virtual currency. Instead of paying for a product or service with cash, check or credit card, a user pays over the Internet through a peer-to-peer, decentralized fashion. The payment network through which a user pays treats the transaction as cash.

How does Bitcoin work?

The intricate “how” of using bitcoin is already taken care of through existing software cryptography. You need only concern yourself with getting started.  The way to do so is by getting a wallet. Just as you need to store paper money in a wallet, you’ll need to store your bitcoins in a wallet on your computer or mobile phone.

Bitcoin wallets serve as both the origin and destination of digitally signed bitcoin transactions. Since transactions are peer-to-peer, if need be, you can trace them back to where the bitcoins were first produced.

To adapt to a world of bitcoin commerce, you should understand that bitcoins are not physical entities – like dollars, yens, euros, or pounds. There are only digitized records of transactions. Bitcoins are not coins or paper bills you stuff inside a handbag or a leather wallet. Once you understand bitcoin as a transaction — and a documented addition to your personal wealth — you can appreciate how you can easily invest or set up an IRA in bitcoin, just as you can use it to buy a product or service.

Who uses/accepts Bitcoin?

Since the dollar is now the world’s reserve currency and has been around since 1794, you’ll of course find it has wider acceptance than bitcoin. Still, because of bitcoin’s advantages and its potential as an investment, it’s gaining increasingly faster acceptance. Some of the well-known businesses that accept bitcoin might surprise you, for example: Amazon.com, Target, CVS, Subway, Overstock.com, Whole Foods and many others.

According to CoinDesk, as of the second week in January 2016, bitcoins are bought and sold in almost 13,000 cities in 249 countries throughout the world. Because of its portability and efficiency of processing, bitcoin is ideal for large transactions.

Bitcoin is virtual currency. Instead of paying for a product or service with cash, check or credit card, a user pays over the Internet through a peer-to-peer, decentralized fashion. The payment network through which a user pays treats the transaction as cash.

Is there a first user or inventor of bitcoin?

Not really. In 2008, a man named Satoshi Nakamoto published a paper on the Internet that describes bitcoin software. In 2009, he also released the first software to initiate the bitcoin network. Since that time though, others have refined Nakamoto’s bitcoin software. There’s a good chance that the Nakamoto name is a pseudonym inasmuch as he (or she) would certainly have a strong vested interest in anonymity.

Does any one person or organization control bitcoin transactions?

No. There is no bank, central authority or intermediary through which a bitcoin transaction is “cleared.” Transactions are entirely anonymous and peer-to-peer.

How are transactions verified and recorded?

Transactions are strictly recorded over a computer network and recorded in a public ledger known as a block chain. The ledger records each bitcoin as a single unit

How many cities and countries now recognize bitcoin for currency transactions?

According to coinbase.com, currently 13,000 cities in 249 countries worldwide recognize bitcoin.

What is a bitcoin wallet?

A bitcoin wallet refers to an app on your computer or mobile phone which stores bitcoins much as the wallet in your pocket or handbag stores dollars. To complete a transaction online, you need to go into your wallet for a specific number of bitcoins.

What are the advantages of using bitcoins over checks and credit cards to make a purchase?

Your transactions clear much faster. You don’t have to wait for bank holidays or credit-card merchants’ delayed processing protocols. International wire transfers frequently take days to clear. Also, your transaction is more secure due to the reduced possibility of hacking. With bitcoin, your processing fee is much less expensive. And so is the merchant’s processing fee.

Is it safe to invest in Bitcoin?

Bitcoin has a strong cryptography; it verifies transactions in the same way banks and government applications use encryption to do so. Through the underlying technology of bitcoin, called crypto currency, bitcoin provides an outlet for wealth without restrictions or confiscation.

Once you have purchased bitcoins, you’ll have a secret unit of information called a key, which automatically signs each of your transactions. This signature is mathematically unique and provides proof you authorized your transactions. It also prevents anyone from changing your transactions in any way.