The unit of account used on the network are bitcoins.
Bitcoin has been recognized as a new form of money that is online and non-political. Use of the Bitcoin network well beyond money and payments may develop. Bitcoin is the world’s first genuine approach to electronic money, that allows person-to-person value exchange online without having to go through a central authority, like a bank or a company like Paypal. The core software behind Bitcoin solves a long standing problem in computer science. How do all computers on a network agree, at the same time, that one event occurred before another, without all computers talking to a central server that acts as an authority? When a central authority is involved in these transactions, the entire network is affected by problems with the authority. For example, if the Paypal or Mastercard servers break down, payments stop. Bitcoin solves this problem using techniques similar to BitTorrent, the file sharing protocol that needs no central server to host files. Bitcoin also has no central authority and, like BitTorrent, all users on the network contribute to it’s stability. However, Bitcoin solves another previously unsolved problem in computer science; how to transfer information without making a copy.
For example, when you send an email, you still have a copy on your computer. Your email is copied, not transferred from one location to another.
For a real transfer of assets to occur, the original location should not have a method of retaining a copy. The Bitcoin network effectively makes transmitting money a real ‘transfer’ as opposed to ‘copying’ of digital information.
An underlying concept of Bitcoin is known as the Blockchain. This is a ledger of all transactions. The ledger itself is stored, like BitTorrent, among all users on the network.
If I sent 1 bitcoin to you, the transaction is recorded in the ledger that my balance is deducted 1 bitcoin while your balance is increased by 1 bitcoin. Similar to cash, if I hand you a dollar bill, I no longer have it in my possession. You now have that dollar bill. Bitcoin works in the same way, but digitally.
Bitcoin is just like digital cash, able to transmit value around the world, instantly, securely, and with very little fees (if any).
Increasing the use of Bitcoin will increase its value to the community, so adoption is essential to Bitcoin’s success.
If you’re still having trouble grasping the concepts, read Nik Custodio’s Explain Bitcoin Like I’m Five.
If you’re keen to buy some bitcoins, first do your homework. Click the blue button above for more indepth information.
If you are more comfortable meeting with someone face to face, try LocalBitcoins where you can find someone in your area willing to sell bitcoins.
Exchanges are not recommended for beginners.