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What are bitcoins?
Bitcoins are the unit of currency of the Bitcoin system. A commonly used shorthand for this is “BTC” to refer to a price or amount (eg: “100 BTC”). There are such things as physical bitcoins, but ultimately, a bitcoin is just a number associated with a Bitcoin Address. A physical bitcoin is simply an object, such as a coin, with the number carefully embedded inside. See also an easy intro to bitcoin.
Alice is far away from Bob and wants to buy his Alpaca socks. In return, she wants to send him a dollar. A dollar bill is a piece of paper which is very easy to create (by those who can), but which is accepted by people in exchange for valuable products and services in the real world, such as the socks Alice wants to buy. One simple thing Alice can do is put a dollar bill in an envelope, mail it to Bob, and then wait for Bob to send the socks to her.
The creation of coins must be limited for the currency to have any value.
New coins are slowly mined into existence by following a mutually agreed-upon set of rules. A user mining bitcoins is running a program that searches tirelessly for a solution to a very difficult math problem whose difficulty is precisely known. The difficulty is automatically adjusted regularly so that the number of solutions found globally, by everyone, is constant: an average of 6 per hour. When a solution is found, the user may tell everyone of the existence of this newly found solution, along with other information, packaged together in what is called a "block".
Blocks contain 50 bitcoins at present. This amount is an incentive for people to perform the computation work required for block generation. Roughly every 4 years, the number of bitcoins that can be "mined" in a block reduces by 50%. Any blocks that are created by a malicious user that do not follow this rule (or any other rules) will be rejected by everyone else. The result is that no more than 21 million bitcoins will ever exist.
Because the mining incentive to put forth the computational power to create blocks will eventually diminish, miners will some day instead pay for their hardware and electricity costs by collecting transaction fees. The sender of money may voluntarily pay a small transaction fee which will be kept by whoever finds the next block. Paying this fee will encourage the miner to include the transaction in a block more quickly.
Originally posted by mee30
You need to research yourself my friend. All the info is out there. You can simply google "what is bitcoin" and the same goes for all your other questions.
When I did a serch for it I got too many sites telling me the same vague explanation.