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What is a Bitcoin?

Bitcoin is a relatively new form of digital currency that is just beginning to hit the mainstream, but many people still don’t understand why they should make the effort to use it, or what it even is for that matter. Bitcoin has definitely opened the door for discussion in the insurance industry. With over 63,000 merchants who accept the currency to pay for goods, cyber crimes start to become a large issue.

How is it different then normal currencies?

Bitcoins, much like conventional currencies can be spent online. However, the most important characteristic, and the thing that makes it different then conventional currencies, is that it is decentralized. No large banks or government controls the money supply, giving it benefits like no other currency:

It’s fast – no money holds, zero confirmations, faster e-transfers
It’s cheap – no transaction fees from your credit or debit card
Central governments can’t take it away – they don’t control it, so they can’t take it
No chargebacks – once the Bitcoin is sent, they’re gone – preventing fraud
People can’t steal your information from merchants – no private information shared
It isn’t inflationary – the government can not print more money

Who Created it?

A software developer called Satoshi Nakamoto proposed Bitcoin, which was an electronic payment system based on mathematical proof. The idea was to produce a currency independent of any central authority, transferable electronically, more or less instantly, with very low transaction fees.

WHO prints it?

No one obviously, it’s digital. This currency isn’t physically printed in the shadows by a central bank, unaccountable to the population, and making its own rules. Those banks can simply produce more money to cover the national debt, thus devaluing their currency. Bitcoins are “mined” and anyone has the ability to create a Bitcoin. They are created by using the computing power of computers in a distributed network.

Limit of currency created

One of the original protocols – the rules that make Bitcoin work – is that there is a limit of 21 million Bitcoins that can ever be created or mined, creating a scarcity element. However, these Bitcoins can be subdivided into smaller parts (much like how dollars and cents operate). The smallest division being a one hundred millionth of a Bitcoin.

What is it based on?

This is perhaps the hardest question to understand, where does Bitcoin get its value? Conventional currency has been based on gold and silver (or it used to be). Theoretically, you knew that if you exchanged a dollar at a bank you could get some gold back. Bitcoin isn’t based off of a tangible commodity, it’s based on mathematics, and it gains its value essentially because two individuals are willing to trade with it.