What is Bitcoin

Bitcoin is a digital token that can be sent electronically from one user to another, anywhere in the world.

Bitcoin is also the name of the payment network on which the Bitcoin digital tokens move. Some people differentiate between Bitcoin capitalized, as the token, and bitcoin lowercase, as the network. Unlike traditional payment networks like Visa or American Express, no single company or person runs the Bitcoin network. Instead, it is a decentralized network of computers around the world that keep track of all Bitcoin transactions, similar to the decentralized network of servers that makes the internet work.

Because there is no central authority running Bitcoin, no one has the authority to force new users to reveal their identities. The network was designed this way to create a currency and a financial network outside the control of any government or single company.

The computers that join the network and track Bitcoin transactions are motivated to do so by the new coins that are released to the network every 10 minutes and are given to one of the computers helping to track the transactions and maintain the network.

Why are hackers using Bitcoin?

The digital currency Bitcoin has emerged as a favorite tool for hackers demanding a ransom for a simple reason: You can start accepting Bitcoin anywhere in the world without having to reveal your identity.

For criminals, this makes Bitcoin much more attractive than systems like Western Union, which generally require customers to provide identification before opening an account and receiving transferred money.

How do you buy Bitcoin?

There are companies in most countries that will sell you Bitcoin in exchange for the local currency. In the United States, a company called Coinbase will link to your bank account or credit card and then sell you the coins for American dollars. Opening an account with Coinbase is similar to opening a traditional bank or stock brokerage account, with lots of verification of your identity needed.

For people who do not want to reveal their identities, there are services like LocalBitcoins that will connect local people who want to buy and sell Bitcoin for cash, generally without any verification of identity required.

To start accepting Bitcoin is even easier. One needs only to create a Bitcoin address, which can be done anonymously by anyone with internet access.

The price of Bitcoin fluctuates constantly and is determined by open-market bidding on Bitcoin exchanges, similar to the way that stock and gold prices are determined by bidding on exchanges.

Can the authorities track criminals using Bitcoin?

All Bitcoin transactions are recorded on the network’s public ledger, known as the blockchain. Law enforcement or financial authorities can sometimes use the blockchain to track transactions among criminals. But as long as the criminals do not associate a real-world identity with their Bitcoin address, they are generally safe. Complicating matters further, there are increasingly sophisticated Bitcoin laundering services, known as tumblers, which mix large quantities of transactions together in order to make it harder for the authorities to track the transactions.

Where it can get more difficult for hackers is when they want to convert the Bitcoin they have received into a traditional national currency. Most companies that convert Bitcoin to dollars in the United States require that their customers provide identification. If a criminal registered with a company like that, it would be relatively easy for the police to track them down.

But there are many Bitcoin exchanges outside the United States that do not require customers to register with a real-world identity. LocalBitcoins also makes it easy to find someone in any city around the world who will meet you in person and pay cash for Bitcoin without requiring any identification — a sort of Craigslist for Bitcoin exchanges. It is also getting easier to buy goods online using Bi