How Bitcoin works
Bitcoin is a cryptocurrency, which means it’s not sponsored by any government and exists only electronically. Although it’s becoming increasingly common to be able to buy things with bitcoin, if you want to take profits in bitcoin, you have to translate them into dollars.
To create a bitcoin — a process called mining — you need to be able to answer increasingly complex mathematical problems. Bitcoin mining requires extremely fast computers and sophisticated software, as well as a great deal of electricity. Bitcoin is limited to about 21 million total coins.
Bitcoin transactions are secure because they use blockchain technology — a type of database that stores information sequentially across many different computers. Transactions are permanently viewable and available to anyone.
To use bitcoin, you need a “wallet” — a piece of software that allows you to transmit bitcoins between users as well as your bank. Your wallet has a password; if you lose your password, you lose your bitcoin. There is no “reset my password” feature if you forget.