Bitcoins: How they work, why they’re becoming mainstream

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DENVER -- Bitcoins are the anonymous digital currency. It has become the way to pay on the Internet underground. But it’s also going mainstream  with many major retailers now accepting it.

But what exactly is it, and how does it work?

Good Day Colorado’s Kirk Yuhnke shows us why bitcoin may not deserve the bad rep it seems to get.

Just another afternoon at Southern Hospitality in Downtown Denver, serving up drinks and BBQ.

But this restaurant is part of a new trend: Forget the credit card, forget the cash – you can now pay with Bitcoin.

The restaurant says it’s better for them, as there are less fees than credit cards.

“With credit card, it’s normally 95 and a half percent, you usually pay about 2 and a half percent in credit card fees,” said Shawn Owen, owner of Southern Concepts. “ With Bitcoin, you don’t have that!”

We watched one customer pay in Bitcoins - it took seconds.

So - how is it different than a credit card?

The value of a Bitcoin changes based on the Bitcoin trading market. Anyone can buy a bitcoin online at the current value: Today, it could be worth 200 U.S. dollars – tomorrow, 150. It’s like a stock in that sense - it goes up and down.

It’s also sent person to person - there is no bank - persay - it`s traded in the cloud.

But it’s totally anonymous and nearly impossible to trace.

So if I send you 2 bitcoins, the digital transaction is saved to a public database and linked to a bitcoin number but never linked to me individually - just the bitcoin number – and that`s why privacy advocates love it so much.

'You don’t attach people’s identity to these accounts so these accounts are random numbers, you can have as many as you want, thousands of them,” said Burt Wagner, who has been buying and selling bitcoins for years.

He says because Bitcoin activity is all public domain, it has to be anonymous.

The secret codes you need to spend your bitcoins is in here, and nowhere else.

But you can also use an app on your phone to store them and spend them by scanning a code from another phone, just like we saw at southern hospitality.

Most agree Bitcoin won`t replace cash - but say it`s likely not going away.

“it`s the coolest thing i`ve ever seen since the internet itself!” said Wagner.

Dell, Overstock.com, Microsoft and others all accept Bitcoins now, but the anonymity of it has also made it the perfect currency for the world of crime.

It`s the de-facto standard on the so-called dark web... You`re probably heard of it?

Click here to view our video report on the dark web, what you`ll find there, why criminals are using it right now and why the Feds are paying so much attention to it.

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