What's The Fuss With Bitcoins?

Bitcoins are the rage now. People are talking about the crypto currency and are buying it in the hopes that the value will increase in the future. So what's bitcoin? To sum it out, bitcoin is a virtual currency created by a mysterious person by the name of Satoshi Nakamoto, no one really knows his real identify, though, there have been documented cases of 'him' being arrested in Australia.

Basically, bitcoin is a a product of a computed algorithm with a finite value. Its value is determine by general supply and demand. While there is no central orginization that governs it, its value is mined by computers participating (known as Blockchain) around the world. When it was first intercepted, it was easy to compute/mine a bitcoin but over the years, its algorithm has computationally increased, thus, making it more difficult to create. This was done by design, to control its value. Anyone that wishes to trade in bitcoin will have an electronic wallet that is protected by a private key with passphrase. It can be stored offline on am usb drive or online with a bitcoin exchange service. When a transaction is made, all computers that are in the blockchain will update its individual ledger. It is akin to everyone in the room updating their 'I owe you' books. For example, you borrow Jim 1 dollar, everyone in the room will take note of it and when you pay him back, they will make note of it again. In order to mine more bitcoins, computers in this blockchain will have to compute an algorithm to validate these transactions. These 'miners', will be rewarded with a bitcoin value.

Some people predict that bitcoin value will increase in the future, what makes it more attractive is that more and more merchants on the Internet are accepting bitcoins for payment of goods and services. There are also bitcoin 'exchange' services on the net that provides conversions of bitcoin to currency for a small service fee.

From a security perspective,  bitcoin provides anonymity as you do not need to reveal your personal identity to be part of it blockchain. Every wallet is identified by a computed hash value. However, be sure to protect your bitcoin wallet, never fully trust bitcoin exchanges with your private key. If someone gets hold of it, he can make transactions using your wallet. There was a recent case of a bitcoin exchanged hacked, as a result, many people incurred losses.