Sarutobi0997 :
Can some one give me a relatively short explanation on Bitcoins ( how they are produced/earned, ways they are "spent", mining, restrictions and the like) im not interested in becoming a "miner" or anything but im wondering how the whole system works because i dont understand most of the online "explanations"
A bitcoin is the unit used in a secure public accounts database called the "block chain". You can visit an online version at
http://, but the database is also distributed via a P2P network to every user of the official bitcoin software, and various other methods. The database records transfers of some amount of bitcoins (including fractional amounts) from one account number to another. These transfers have to be digitally "signed" by a private cryptographic key known only to the sender. The account also has to have enough balance to send, which is found by looking at all past transactions in and out of that account, recorded in the block chain. Every node on the bitcoin network can validate the signature and balance on it's own, because it has the full transaction history. If a transaction fails to validate, it does not get passed on to other nodes.
Past transactions are grouped into "blocks" about every 10 minutes, each verified by a hash value calculated for it. By hashing the contents of the block and comparing it to the published hash value, you can verify the transaction data has not been messed with. Each block also includes as data the hash of the *previous* block, which verifies that block also has not been messed with. Every block verifies the one before it, so they form a linked chain all the way back to the start of bitcoin transactions (the Genesis block). Thus you can prove the entire history of transactions has not been messed with, ever. You also have to find a random number (nonce) to include in the block, such that the hash has an especially low value (lots of leading zeroes). This is so hard to do that the entire bitcoin network of hundreds of thousands of GPUs can only find such a number and validate a block in that ten minutes.
The point of making it hard is that if you wanted to include a bogus transaction, like spending a balance you didn't have in your account, you would have to discover the right number to include along with the block hash, in competition with everyone else working on new blocks. The incentive for people to work on new blocks, is they get a reward of 25 newly created bitcoins for themselves when they find the right number and resulting hash. But the point of making it so hard is to prevent bogus transactions.
So to answer your questions directly, bitcoins are produced as the reward for preventing bogus transactions, and so making a trustworthy account history. The mechanics is doing a lot of hash calculations using different random numbers added to a set of transactions. If you could not trust the accounts data, it would be useless for financial transactions, so this is a central feature.
Spending bitcoins is simply generating a new transaction sending part of your balance from your account to another account. This can be via the bitcoin software, or a growing number of other apps and websites. In return for sending them some of your bitcoin balance, they send you whatever goods or services you wanted. The incentive for merchants is way lower costs relative to bank cards (no fraud or chargeback risk, no bank fees). For individuals, you can send money to anyone, anywhere, almost instantly, and it's confirmed in an hour or less. You are less exposed to identity theft, too, because your name is not part of the transaction, just the account number.
Mining is just the figurative name for generating new blocks. It's by analogy to gold mining, where you work hard and add to the supply of gold. Similarly, for bitcoin "mining", your computer works hard to add to the supply of bitcoin balances (namely, yours). Anyone with adequate hardware can mine for fun, but to mine profitably takes at least a fast ATI card (which are much better at doing hash calculations than NVidia cards), or custom hardware (FGPAs or ASICs). Otherwise you spend more in electricity than the coins you generate are worth. Most people mine in "pools" that share the workload and the payoffs, so you earn a steady dribble rather than winning the lottery for finding a block.
There are no age restrictions or need to show ID to set up a bitcoin account. You just download the software and it creates them automatically. Trading bitcoins for local currencies (dollars, euro, etc.) on an exchange often requires paperwork, because of the real money involved.
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