What is Bitcoin?
Bitcoin, often described as a cryptocurrency, a virtual currency or a digital currency - is a type of money that is completely virtual.
It's like an online version of cash. You can use it to buy products and services, but not many shops accept Bitcoin yet and some countries have banned it altogether.The physical Bitcoins you see in photos are a novelty. They would be worthless without the private codes printed inside them.
What is altcoin?
An altcoin is any digital cryptocurrency similar to Bitcoin. The term is said to stand for “alternative to Bitcoin” and is used describe any cryptocurrency that is not a Bitcoin.
Altcoins are created by diverging from Bitcoin consensus rules (the fundamental rules of the cryptocurrency’s network) or by developing a new cryptocurrency from scratch.
Some of the popular altcoins includes Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), EOS and many more.
How does it work?
Each Bitcoin is basically a computer file which is stored in a 'digital wallet' app on a smartphone or computer.
People can send Bitcoins (or part of one) to your digital wallet, and you can send Bitcoins to other people.
Every single transaction is recorded in a public list called the blockchain.
This makes it possible to trace the history of Bitcoins to stop people from spending coins they do not own, making copies or undo-ing transactions.
Why Bitcoins Have Value?
First and foremost, Bitcoin has value due to the same reason the paper and digital cash does – it’s a handy form of money commonly accepted by people. It is used to transfer value and buy or sell things. Yet, unlike the US dollars, whose value and legal status are enforced by the government, Bitcoin’s value comes from its code, infrastructure, scarcity, and adoption.
Although it’s not tangible, Bitcoin’s code gives it features of traditional fiat currency, including scarcity, divisibility, portability, fungibility, and recognizability.
Besides, Bitcoin is decentralized and can be used without middlemen, provides some level of transparency, can be accessed and used by anyone with an internet connection, is impossible to counterfeit and confiscate, and has other features such as programmability.
Most importantly, it can be used as a store of value like gold or other commodities, yet unlike its physical counterparts, it can be transported from one end of the world to the other via communication channels in a matter of minutes.
Next up : How to buy cryptocurrency?