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What is a bitcoin?

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Tags: Bitcoin
Bitcoin has received a lot of attention recently due to the big names supporting it, but many investors have yet to grasp the basics of what this online currency is.

The Winklevoss twins of Facebook (FB-Q) fame have pegged the bitcoin market at $4 billion US and expect it to eventually grow to $400 billion, according to Forbes.

You can even withdrawn bitcoins from an automatic teller. The world's first ATM is located in a Vancouver coffee shop, and the machine's owner says $100,000 Cdn changed hands in its first week running.

For those still fuzzy on how the online global currency works, Jamie Robinson, founder of QuickBT.com, a bitcoin vendor, offers the basics of trading and investing.

Bitcoin 101

A bitcoin is a lot like a retail gift card. When you purchase a gift card for a certain amount, there is often a serial number on the back. Similar to that serial number, each person using bitcoin is assigned a bitcoin address from which they can send and receive bitcoins.

How can I send money to a retailer/person using bitcoin?

You can visit a site such Blockchain.info/wallet, which allows you to set up a wallet for your bitcoins, as well as gives you your first bitcoin address. Once you have your first bitcoin address, you can visit QuickBT to put money on your account.

How can I invest in bitcoin?

Because bitcoin is a currency its value fluctuates and the value of a single bitcoin today may not be traded at the same value as a bitcoin tomorrow. To determine the price of one bitcoin, you can go on a website like Canadian Virtual Exchange, which is an exchange platform for bitcoins. Such websites allow you to buy and sell blocks of bitcoins at their current market value.

What’s the advantage of paying for goods and services using bitcoin versus other payment methods like credit cards?

There are more advantages to businesses versus individuals. Rather than pay fees associated with credit cards, there are no service fees for bitcoin transfers. Also all transactions are final, so there is no risk of a customer cancelling a credit card payment. No one can steal your bitcoins, since you need a secret code to authorize trades or transfers.

How can I convert my bitcoins back to cash?

Since bitcoins are considered a bartered good, you need to find someone online willing to trade bitcoins for cash. Various websites facilitate these types of trades, such as localbitcoins.com and Canadian Virtual Exchange.

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