What is a bitcoin?
It is a digital currency or cryptocurrency. This means you cannot find it in physical notes or coins. Many companies have tried to create physical bitcoins, without success.
Bitcoins exist in the digital world of thousands of computers, organised in “blocks,” that process the transactions. The database technology underlying bitcoin is called blockchain – a type of software that works as an account ledger on computers all over the world.
An increasing number of entrepreneurs believe blockchain, which can circumvent the need for big financial intermediaries, will challenge traditional payment systems. Various banks are investing large sums to explore how blockchain could revolutionise payment systems and cut costs.
The currency also exists in the electronic wallets of people that possess bitcoins.
Payments are sent directly, securely and potentially anonymously between two people’s digital wallets, whereas all mainstream transactions, including those using intermediaries like Paypal and credit card lenders, run through banks and usually require named accounts and verification.
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