What are bitcoins? Virtual currency explained

A sign advertising Bitcoin is seen.

February 4, 2014 7:00:23 AM PST
If you're wondering what a bitcoin is, you're not alone.

Unlike the quarter, dollar, pound euro or any other currency from around the world, bitcoins are completely virtual. They exist only online and are not controlled by a central authority like the Federal Reserve.

If hard currency is like a record, then a bitcoin is like an MP3, ABC News explains.

All transactions take place in an online marketplace, where users are untraceable.

You hold bitcoins in an online "wallet," which is an account set up on a secure third-party website.

ABC News reports that, unlike banks, wallet firms won't invest your money; nor do they guarantee the same protections as banks that are federally insured.

Click here for more from ABC News

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