What are bitcoins?

BitcoinIt seems that everybody else is talking about bitcoins, so I thought I would take some time here to explain a very small amount of the complex world of bitcoins. Bitcoin has been gain in popularity as it’s claim of being the money of the online world seem to be gaining ground with many of its users. Given its new found popularity, I am going to try to simply explain what bitcoins are here.
Bitcoins are a type of virtual currency, it can be imagined as a physical coin represented digitally by a series of mathematical computations. These ‘coins’ are stored at an address that is used by you as a virtual wallet, you are able to take coins from your wallet and transfer them to another wallet. The advantage of Bitcoin is that these ‘money transfers’ can be made very quickly, in large amounts to anywhere in the virtual world for no fees. Compared to more traditional money transfers, this is a massive advantage.
Bitcoins are created (mined) using processing power to solve mathematical problems of huge complexity, these computations are used to verify transfers of other bitcoin users and miners are reward for their effort with a payment in bitcoins.
There will only ever be a certain amount bitcoins available to be mined and after they are all found, there will never be any others brought into existence. As more coins are found the mathematical problems needed to mine more become more complex and require more processing power and time. This carefully engineered situation has created a type of ‘deflationary’ currency. As the demands for coin increases, there are less coins to go around, causing the price to increase and recently the price has been increasing rapidly.

So, how do you get your (virtual) hands on some of these highly sought after coins?

The best way I can see is to buy them and New Zealand has its very own exchange BitNZ. You can sign up with them and after depositing some money you will be able to buy bitcoins on the open market. Instructions are on the site and you can deposit NZD right after you have made an account. As my site tries to teach you how to make money online without extra investment, I will mention bitvisitor which is a site that allows you to get paid in bitcoins for visiting websites. These sites will help you with setting up your very own bitcoin wallet to fill with bitcoins to trade, spend or simply hold as an investment. To create your very own wallet, I recommend blockchain.info.

I am unfortunately unable to go into too much more details about bitcoin as this is a very large subject, if you have any questions please do not hesitate to add them to the comments below and either I or another visitor will try to answer them the best we can.
One more word before I finish up, bitcoin is a relatively new area and the transactions at this stage are irreversible, there are limited protections for users. I urge you to take due care with bitcoins and as with anything, never put down money you are not prepared to lose.


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