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How Does Bitcoin Work

Updated on June 25, 2017
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My major interests and career include piano tuning, aircraft piloting, and nature walking. My talented wife made the chain-linked armor.

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Bitcoin Fever

When I sat down at a church dinner a couple of years ago, I didn’t know that I would be sitting next to a bitcoin evangelist. A friend was sitting next to me and asked me if I knew anything about bitcoins. Once he found out that I didn’t know very much he spent the next hour or so telling me all about them. He called himself a bitcoin evangelist because he was so enthused about them. He had bought some at $100.00 each and now they were worth about $1000.00 each.

A few weeks later I felt sorry for him when I learned that the bitcoin had hit a bubble and had dropped down again in price. However my sorrow didn’t last very long. Bitcoin recovered and now one coin is worth at the time of writing this article, $2561.22. I think my friend did very well.

The bitcoin has gone up so fast that if someone bought a hundred dollars worth of this currency in 2010 it would be worth 75 million today. Makes a person wish they could build a time machine and go back and buy them up.

I checked Ebay and saw that someone was selling 40 bitcoins at the starting price of $40,000. So far there was only one bid, but probably a lot more bids came in as folks want to invest in them.

But How does it Work?

The bitcoin is not owned or controlled by any one corporation but by many over the Internet so it runs on it own currency and doesn’t need a bank to back it up.

The price is very volatile as it loses or gains value very fast. So far the trend, despite the drops, is upward so it is a good investment. However the investment should not be more than you can afford to lose. The bottom could drop out at any moment.

Bitcoin does have a downside in that it is also the choice for wrongdoers who want to move their money around without government knowledge. But many legitimate businesses use the coin to buy and trade.

How do I buy a Bitcoin?

You can buy bitcoins from your smart phone using “Coinbase”. You have to download the app and then make a account and add a payment account. You can buy both bitcoins and Ethereum, which is another online currency that is going up in price.

Coinbase will let you use a credit card and this might be the best method for those in the united States. They also store your coins for you and is a good place for a beginner. However you need to check this out throughly before jumping into any tranaction.

Another way is to open an account with LocalBitcoins.com. Open a account and they will give you a free wallet to store your coins. They probably charge some type of fee, so again be sure to check everything out before doing this.

Your bank or credit card may call to make sure it is really you making these purchases.

Warning: Do not use Paypal to buy bitcoins! Paypal does not like bitcoins because they are in competition with them and will freeze any accounts that try to buy them.

I don’t agree with Paypals policy on this since someone might innocently buy this currency and then get their account frozen. It seems like a mean deal to me.

Bitcoin For Dummies

Bitcoin For Dummies (For Dummies (Business & Personal Finance))
Bitcoin For Dummies (For Dummies (Business & Personal Finance))

I like this book because it explains most everything you need to know about bitcoins and how to buy them.

 

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