Bitcoin was so off the radar a year ago
that Bank of Canada Governor Stephen Poloz knew nothing of the virtual
currency until it was woven into the plot of a popular American
television show.
“I first heard about it on The Good Wife,”
Mr. Poloz said during a September visit to the central bank’s Calgary
office, referring to the CBS legal drama, which produced an episode
inspired by the mysterious origins of Bitcoin in early 2012.
What is Bitcoin?
Bitcoin is a completely decentralized form of virtual currency that
enables direct payment over the internet by skipping the middleman,
which is usually a bank or credit card company. Transactions are safe
due to cryptography used to prevent double spending, counterfeiting, or
theft. Users can use bitcoins for a variety of real transactions.How does Bitcoin work?
Before a Bitcoin can be purchased, a user must
install a virtual 'wallet' onto a personal computer or mobile device.
The wallet is similar to personal finance software and keeps track of
Bitcoin balance and transactions.
The user then pays for bitcoins, either through a
credit card, bank account or anonymously with cash. Bitcoins are
transferred directly into a Bitcoin account, and the user can send and
receive payments directly to a buyer or seller.
Similar to trading stocks, a buyer can place an
order for a Bitcoin through an exchange program once the funds are
available. Bitcoins can also be purchased from third parties.
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