1 Bitcoin = $622.55 USD
Bitcoin is a new currency that was created in 2009 by a then unknown person using the alias Satoshi Nakamoto. Bitcoin transactions are made without a middleman – meaning, no banks are involved. There are no transaction fees and at present, no need to give your real name. More and more merchants are beginning to accept bitcoin; you can buy web hosting services, pizza or even manicures using the digital currency.
Bitcoin is a form of electronic money that is maintained independent of traditional banking and banking regulations that first circulated in 2009. Since then, bitcoins have quickly become the most prominent of several fledgling digital currencies. Bitcoin relies on a network of computers that solve complex mathematical problems as part of a process that verifies and permanently records the details of every bitcoin transaction that is made.
Unlike other traditional currencies, where a central bank decides how much money to print based on goals like controlling inflation, no central authority governs or regulates the supply of bitcoins. However, like other commodities and currencies, its value depends on people's confidence in it.
Bitcoin supporters claim that it’s easier and safer to send bitcoin over the internet than to send other, more traditional forms of money. Using bitcoin to pay for items means avoiding credit card, foreign exchange or cash handling fees, and is supposed to be less susceptible to fraud. At the same time, because there is an upper limit on how many bitcoins can ever be mined, it can not be inflated by a central bank, which in theory makes it more predictable.
Although bitcoin payments are registered on a list of transactions known as the block chain, these transactions are anonymous, meaning bitcoin has been used for some not-so-above-board activities. It was the currency of choice for the Silk Road, an online marketplace for everything from drugs to firearms, and has also been used to get around national currency controls.
The price of bitcoins has spiked from around $30 to more than $1,100 in December 2013 as more people became aware of the currency and speculators jumped into the highly volatile market. After the collapse of Mt.Gox as well as the growing concern that bitcoins could be more susceptible to fraud than previously thought, a steady decline in prices was experienced. Compounding the issue, its price can vary greatly depending on the exchange.
A Bitcoin wallet is a service that stores your bitcoins for you. Unlike traditional banks, bitcoin wallet firms don't generally invest the money you deposit with them. On the downside, bitcoin wallets don't have the Federal Deposit Insurance Corporation backing that insures Americans' bank deposits up to $100,000. If your Bitcoin wallet gets robbed or collapses, you're out of luck.
Japan's MtGox, which had hosted 80% of the world's bitcoin trades, collapsed after losing about 850,000 bitcoins to DDoS attacks. The company has filed for bankruptcy protection in Japan in February, 2014.
Your Bitcoin wallet is what allows you to transact with other users. It gives you ownership of a Bitcoin balance so that you can send and receive bitcoins. Just like email, all wallets can interoperate with each other.
Desktop wallets are installed on your computer. They give you complete control over your wallet. You are responsible for protecting your money and doing backups.
Mobile wallets allow you to bring Bitcoin with you in your pocket. You can exchange bitcoins easily and pay in physical stores by scanning a QR code or using NFC "tap to pay".
Web wallets allow you to use Bitcoin on any browser or mobile and often offer additional services. However, you must choose your web wallet with care as they host your bitcoins.