Stack of physical bitcoins

A Simple Explanation of Bitcoin

Bitcoin logoBitcoins are basically cash that exists only on the Internet.

You can transfer Bitcoins anywhere in the world, in seconds. For most transactions, this is entirely free and the fees that do exist are tiny (a few pennies, if that).

In fact, Bitcoin is a whole different currency. It’s not dollars, not pounds and not euros, but it does have worth – people are buying Bitcoins all the time. In fact, while I am typing this out, 1 Bitcoin is worth ~ £11.1 (GBP) or $17.39 (USD).

All you need to receive Bitcoins is a Bitcoin address, which is very similar to a bank account number, but you don’t need a bank account to store Bitcoins. They’re stored on your computer, your phone, your tablet or wherever you decide to store your Bitcoins.

This is what a Bitcoin address looks like:

14UKGSFX9rFdeRZ8AD51ckYVTp9B8em6WM

As you can see, it is just a random series of numbers and letters, but with that people can send you any number of Bitcoins. You can create as many Bitcoin addresses as you’d like, and its easy to do so in pretty much all the Bitcoin software that is available.

Who needs to know about your Bitcoins though? The answer is no one except you.

Bitcoin’s systems are decentralised in their nature, which means you don’t need a bank account. You can store your Bitcoins entirely yourself if you wish. Alternatively, you can use one of the various online Bitcoin services that let you access your Bitcoins from anywhere.

An online Bitcoin service I’d recommend for beginners or anyone with a passing interest in Bitcoin is Blockchain’s My Wallet service. My Wallet lets you create a Bitcoin wallet, access your Bitcoins from anywhere and even buy Bitcoins via bank transfer.

I hope you’ve found this a useful, simple introduction to Bitcoin. Please feel free to add a comment below with any constructive feedback.

Please also be aware, this article is deliberately simplified and does not fully explore Bitcoin concepts. Some concepts, such as the fact that users do not actually store Bitcoins themselves, only the public/private encryption keys needed to access them, are beyond the scope of this article.

For more detailed information, check out the following links:

Thanks for reading.

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