What Are Bitcoins?

COCO COMMENTARY

ImageBitcoins have been in the news quite a bit lately, and I suspect we are going to hear a lot more as more merchants begin accepting them.  Bitcoins are digital currency. If you think of a $100.00 bill as being a compact disc of recorded music, a Bitcoin is like an MP3 file.  Bitcoins are gaining popularity throughout the world because they can be exchanged peer-to-peer, transactions in Bitcoins are anonymous, and the transaction fees involved are extremely low compared to credit card and currency exchange fees.

There are currently 21 million Bitcoins, but only 11 million are currently in circulation.  New Bitcoins are created through “mining,” a complex series of mathematical computations, the idea being that introducing new Bitcoins will be as difficult as “mining” for more gold. Like gold, Bitcoins can’t just be created out of thin air in the same way government fiat money can just be…

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