The Ultimate Guide to Bitcoin covers all aspects of the Bitcoin phenomenon, explaining how virtual currency works, how it differs from and compares to traditional currency, the history of Bitcoin, how to purchase and pay with bitcoins, where and how one can obtain and manage a Bitcoin wallet, how to become a Bitcoin minor, and more. In addition, this book presents information about competing virtual currencies, and compares them to Bitcoin. Readers will also learn to judge the relative value and safety of the Bitcoin currency, and determine whether the rewards outweigh the risks.
Bitcoin is the virtual currency of the Internet, a distributed, worldwide, decentralized digital money. It's the most popular of several current cryptocurrencies, devised in 2009 by programmer Satoshi Nakamoto.(Although that's probably not his real name...)
The unit of currency in the Bitcoin system is called a bitcoin, or BTC. A bitcoin is not a physical currency, such as a dollar bill or nickel, but rather just a number associated with a Bitcoin Address. Unlike traditional currencies, Bitcoin is not issued from or managed by any central government bank or organization. With Bitcoin, users become their own banks – and assume all the risks inherent in that proposal. As such, the value of a bitcoin is not pegged to any traditional real-world currency. Over the currency's relatively short life, the dollar value of a bitcoin has fluctuated from 14 cents (actually, zero at inception) to more than $1,2000. (Today a bitcoin is worth approximately 800 US dollars.)
Bitcoin exists on a peer-to-peer network, much like BitTorrent. Users on the P2P network, called miners, enable their PCs to be used to host and manage bitcoin transactions. To use Bitcoin, a user must sign up with an online wallet service, through which all transactions are managed. This digital wallet is typically stored on the P2P servers, with all transactions secured via public-key encryption. The public key is used to encode all payments, which can then be retrieved only with the use of the user's private key.
One can earn bitcoins by providing goods or services to other users or by participating in the mining process. Users can also purchase bitcoins with traditional currency from one of several Bitcoin Exchanges. Bitcoins can then be spent on other goods and services available over the Internet.