Hobbies, TechSavvy

All About Bitcoin

My dance studio has recently started accepting Bitcoin as payment. What I’ve found is that most people don’t pay in Bitcoin, but almost everyone has a question about what it is and how you pay with it. I want to clear up how Bitcoin works, and why I’ve started accepting it as payment for my dance studio. By the end of the article, you may want to get some Bitcoin of your own!

What IS It?

Bitcoin is what’s known as a “cryptocurrency.” A cryptocurrency is a type of money that is encrypted and kept safe, much like an online bank account is. Your identity is stored as a series of numbers, without any personally identifying information. One common myth about Bitcoin (we’re going to call it BTC from now on) is that it is anonymous. That is not true! You CAN be identified by your transaction number, and therefore could easily be caught if one of the vendors you spent money with was to reveal your account information. However, if you just make payments from person to person you’re pretty safe.

How Does It Work?

Bitcoin works through a technology called “blockchain.” This is an enormous public domain ledger of all transactions that take place. It is stored on thousands of computers worldwide, which makes the system impossible to hack by brute force. Every time someone makes a transaction with someone else, it has to be verified by 6 other computers in the system, to make sure that the information they have matches up with the information you have. If all the information matches, the computers will “sign off” on the transaction and it is finalized. For example when you buy nursing gear from nightingaleknows.com, 6 computers will verify that the amount you sent and the amount the website receives are the same. This stops anyone from scamming the system. Since the computers doing the checking work are totally randomized, you can’t hack a few of the computers and hope to scam some money. Those computers would be recognized as wrong by the others.

How Do You Get It

You can buy Bitcoin at exchanges, like ItBit or Coinbase. You just use your card to buy it, and it sits “in your wallet.” I put that in quotes because technically, the wallet your Bitcoins are in isn’t really a wallet like you’d think of it. It’s just an identifying code, stating that x amount of BTC are yours. Bitcoin exists only on the blockchain, which is why it’s so secure.

Here’s my word of caution: don’t buy BTC you can’t afford to lose. It’s an experimental, VERY liquid investment. It gains and loses value every single day. Don’t put all your money in it; diversify! But it’s always good to have a bit in it, especially because it’s gaining value all the time. It used to be worth about 1 BTC = $16 USD. Now at the time of writing it’s about 1 BTC = $7000 USD.