Most people have heard of Bitcoin by now, but it would be relatively accurate to say that many do not understand what it is or how it started. Essentially, Bitcoin is a payment system - a more-or-less closed loop payment system. This system was invented in 2008 by Satoshi Nakamoto. Unlike traditional currency that is backed by a standard of gold or other precious metals, the standard for Bitcoin is a mathematical equation. The process of buying, selling and paying with Bitcoins is validated by mathematical equations that are proven by users who apply their computing power to verify and record the payments.
The popularity of Bitcoin as a valid currency and payment method has grown beyond most consumer's expectations. Since its invention in 2008, over 12 million bitcoins have been created and put into circulation and they are currently valued at $298 USD per bitcoin. Bitcoin transactions average between 75,000 and 100,000 transactions per day which is almost a 100% increase over the past year.
If you are going to catch a ride on the Bitcoin train, you're going to need a Bitcoin wallet. While the word conjures up images of soft leather and a lot of card slots, this wallet is really a type of lockbox for the digital "keys" you use in making Bitcoin transactions. The private keys that you have to keep are what you use to access your bitcoin addresses. They are also what you use, in conjunction with the public keys, to digitally sign the Bitcoin transactions you participate in. Bitcoin wallets come in a several different forms - each specific to different devices, and you can also store your keys in "cold wallets" which are offline.
The term mining, as it refers to Bitcoin, is the process of creating new Bitcoins. The mining process serves two main functions: to add transactions to a block and to create new Bitcoins. In order to successful mine, a user has to compile recent transactions that existing Bitcoins have been involved in into blocks and then working towards solving a complex computer puzzle. The miner that compiles and solves the problem first has the ability to place the next block in the chain and receives a monetary incentive in the form of Bitcoins as well as receiving the new Bitcoin.
Bitcoin is a virtual currency that is currently being exchanged online for the past several years. While Bitcoin certainly isn't new, it has really started gaining popularity over the past few years and has started to show some mainstream traction. Bitcoin is now an accepted payment type for several large online retailers such as Overstock.com and TigerDirect.com as well as a handful of brick and mortar establishments. The main reason behind using Bitcoin to pay for purchases and such is that it is a significantly cheaper way to do business. You basically get more for your money.