What are Bitcoins?

What are Bitcoins

Bitcoin is a decentralized virtual currency based on a peer to peer network, Bitcoin was created by the pseudonymous entity Satoshi Nakamoto. It is subdivided into 100-million smaller units called satoshis.

It is the most widely used alternative currency, with the total money supply valued at over 100 million US dollars.

Bitcoin has no central issuer; instead, the peer-to-peer network regulates Bitcoins balances, transactions and issuance according to consensus in network software. Bitcoins are issued to various nodes that verify transactions through computing power; it is established that there will be a limited and scheduled release of no more than 21 million coins, which will be fully issued by the year 2140.

Internationally, Bitcoins can be exchanged and managed through various websites and software along with physical banknotes and coins.

Bitcoin addresses

Payments are made to Bitcoin “addresses”: human-readable strings of numbers and letters around 33 characters in length, always beginning with the digit 1 or 3, as in the example of 1FMb73UsSJ66nwEphkMkANothvUYmtyxa9.

Users obtain new Bitcoin addresses from their Bitcoin software. Creating a new address can be a completely offline process and require no communication with the Bitcoin network.


Transaction fees

Transaction fees may be included with any transfer of Bitcoins. As of 2012 many transactions are processed in a way which makes no charge for the transaction. For transactions which draw coins from many Bitcoin addresses and therefore have a large data size, a small transaction fee is usually expected.



The network’s software confirms a transaction when it records it in a block. Further blocks of transactions confirm it even further. After six confirmations/blocks, a transaction is confirmed beyond reasonable doubt.

The network must store the whole transaction history inside the blockchain, which grows constantly as new records are added and never removed. Nakamoto conceived that as the database became larger, users would desire applications for Bitcoin that didn’t store the entire database on their computer. To enable this, the network uses this Merkle tree, the blockchain, to organize the transaction records in such a way that client software can locally delete portions of its own database it knows it will never need, such as earlier transaction records of Bitcoins that have changed ownership multiple times.


Exchange rate

Bitcoin Value

Bitcoin Value

The exchange rate for 1 BTC in USD on MtGox exchange

Prices fluctuate relative to goods and services more than more widely accepted currencies; the price of a Bitcoin is not sticky.

In August 2012, 1 BTC traded at around $10.00 USD. Taking into account the total number of Bitcoins mined, the monetary base of the Bitcoin network stands at over 110 million USD.

3 Thoughts on “What are Bitcoins?

  1. Why is there no talk of other crypto markets? BitCoin value was DOWN yesterday… don’t leave your investments there, instead trade your BTCs for an upcoming crypto market (via cryptsy)…. Smaller markets are going up by 1000% in a day (coinmarketcap). I bought Zetacoins (ZET) at $0.00004 per coin via cryptsy last week and the value today is .00001, making me just under $10k… grabbing some more today due to no sign of slow down, no press for Zetacoins yet so potential for huge returns is sky high, I see them at least $.10 next week. I’d advise you to get some now, or really regret it next week. At least take my advice and get in on another crypto before they all get sky high

  2. Excellent Summary! But One Question… what are the maths problems that mining solve? I mean… what are they for or for Whom? who generates this Maths problems and with what purpose ?
    Kind Regards

  3. Ahrite i really loved your site. I stumbled your site while searching on the web. I came across a way that you can get free bitcoin.

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