1

does it 'cost' anything to set up an account? If bitcoins are virtual, why/how does an exchange rate work?

2

You are asking 2 very different questions so here goes:

1) Bitcoin wallets are free to create and use. blockchain.info, for instance, allow you to create an account and receive Bitcoin instantly. The only real cost is when you send coins out to someone - you have to pay the miner fee. The best you can do is read about it here https://en.bitcoin.it/wiki/Transaction_fees

2) Bitcoin are as virtual as Euros or US Dollars - it's a currency which you can trade like any other currencies. Few notable differences though - Bitcoin is finite, meaning there can only ever be 21 million Bitcoin ever produced. Miners are producing the coins by solving a complex algorithm. The more Bitcoins are mined, the more complex it becomes to mine and therefore more expensive in terms of resources (read electricity and hardware). Nobody can set a price to a Bitcoin, it's a market driven by demand and it is way more volatile than general currency trading. Exchangers just allow users to buy or sell Bitcoin for another currency but there is no guideline. That's why a lot of users are doing arbitrage between different exchangers in order to get the most profit out.

Hope that helps you

  • Nice answer, just a little correction: the difficulty of mining is actually independent of the number of bitcoins that were found, but rather it solely depends on the amount of mining power that is competing to find blocks. – Murch Feb 10 '17 at 18:26

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