How Bitcoin Works
Bitcoin has emerged as a digital currency that exists virtually. It is a “cryptocurrency” which uses cryptography to manage the creation of units, administer use and provide security. Bitcoins are “mined” by solving complex mathematical problems. Ownership of bitcoins is anonymous. Bitcoin is different than the currency we use in three fundamental ways.- Bitcoin operates without a central authority (e.g., a central bank). The currency is managed by a peer-to-peer technology that is responsible for all functions, including issuance, transaction processing and verification.
- Unlike the national currencies, bitcoin exists primarily as a digital currency, though bitcoin can made available in physical form, if desired.
- The number of bitcoins is limited to 21 million. New bitcoins are created at a rate of 25 every 10 minutes (a rate which is reduced by 50% every four years).
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2014 FMG Suite.
