What is Bitcoin? An explanation for seniors

You may have heard about Bitcoins and be wondering what they are, or you may know what they are and wonder if they might make a good investment. This article is a brief introduction to what Bitcoins are and some of their strengths and perhaps more importantly some of their shortcomings.

Bitcoins are a non-fiat electronic currency which can be transferred between peers, without the need of another financial institution. Bitcoins are accepted for some transactions by merchants, but generally is used privately online as simply a form of currency. As its popularity is increasing, so too are the services and merchants accepting Bitcoins.

Where do Bitcoins come from?

Bitcoins are produced through running a complicated algorithm on a computer which runs until it matches a certain pattern defined by the program. When a match is found, the person who found it owns that Bitcoin. There are only a certain amount of valid Bitcoins, and once they are all taken – no more can be produced.

If you don’t know how to create Bitcoins yourself (it is expensive and time consuming to do), the obvious next step is to buy one. You can do this by using a website like MtGox

Can I make money from Bitcoins?

Bitcoins are like any investment in that there are many risks associated with it. Bitcoins are especially risky since there is nothing underlying the currency in term of gold. Bitcoins are literally only worth what people will pay for them and if they stop wanting them, the value will disappear.

Where can I find out more information about Bitcoins?

The best, unbiased source of information about Bitcoins is Wikipedia, click here to read the article on Bitcoins.

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