Bitcoin is a relatively new decentralized electronic currency which operates over a peer to peer network. The code is completely open source and available for review and even modification if accepted by the majority of the network. All transactions are recorded in a ledger called the block chain. Bitcoin miners are using their computational power to "hash" algorythms which review and confirm all the transactions occurring on the network and in turn are rewarded Bitcoins for their work.
Without a government as a central authority Bitcoin is truly the currency of the people operating on the network of connected computers, servers, exchanges, wallets, and anything else tied into the peer to peer network.
Bitcoins are kept in a wallet as your "account" and can quickly be transferred from one wallet to another via an address which essentially acts as an account number if you relate it to today's traditional financial system. A traditional wallet is a piece of software that is installed on one's computer and holds the keys to access your Bitcoins.
As can be seen in the wallet image there is red lettering "out of sync" and at the bottom it says "Synchronizing with network..." and a green status bar. Each time the wallet is opened it needs to connect to the network. The process of synchronizing involves downloading the current block chain data (from where it left off when it was last closed) so that the local data file is up to date and identical to the remainder of the network.
The risk to Bitcoin storage in a wallet on your computer is that if you have a crash and lose drive data then your coins are essentially lost as well. That could be a very costly endeavor if you have holdings of value. However, you can back up your wallet data to a remote drive and always recommend doing so for your own protection. There are many alternatives to storing your Bitcoins ranging from new and innovative local wallet software, online wallets and although not recommended some people even leave their coins in the hands of an exchange.
As crypto currencies continue to evolve there are now many alternatives to using Bitcoin as your electronic currency of choice. This article provides a good summary. What are altcoins?
The risk to Bitcoin storage in a wallet on your computer is that if you have a crash and lose drive data then your coins are essentially lost as well. That could be a very costly endeavor if you have holdings of value. However, you can back up your wallet data to a remote drive and always recommend doing so for your own protection. There are many alternatives to storing your Bitcoins ranging from new and innovative local wallet software, online wallets and although not recommended some people even leave their coins in the hands of an exchange.
As crypto currencies continue to evolve there are now many alternatives to using Bitcoin as your electronic currency of choice. This article provides a good summary. What are altcoins?