Once dismissed as a digital currency that would never take off, Bitcoin has proven the critics wrong and is quickly transforming traditional payment systems.

It’s set to shake up online payment systems.

Bitcoins are organized in “blocks” which process transactions in the digital world. The database infrastructure surrounding the transaction is called a “blockchain;” software that works as an account ledger on computers all over the world.

Blockchain software is becoming more popular with tech entrepreneurs and new businesses as a substitute to costly and complicated financial intermediaries. Leading international banks are also investing vast sums of money to explore how blockchain could cut costs and revolutionize their payment systems.

Financial experts state Bitcoin challenges traditional payment systems, and could eventually replace physical currencies. Indeed, it already exists in electronic wallets. But what are those?

Bitcoin Digital Wallets Make Payments Easier

Digital wallets are the new thing. They allow people to exchange Bitcoins between each other and make payments securely, directly, and if you choose, anonymously. It’s set to shake up online payment systems including PayPal. Paypal and other transaction apps are often linked to your bank account, which accrues charges for each transaction. Bitcoin is separate, independent, and not linked to banks.Bitcoin is the most popular digital currency.

Bitcoins can be purchased like any other product online, through brokers and trading exchanges. In some countries, ATMs allow customers to upload digital currency directly to their electronic wallets.

Bitcoin has become so popular that large corporations including Bloomberg, Dell and Microsoft now accept it. Indeed, this exchange can work out at a better trading value than traditional currency. There is also a large selection of online stores that accept the digital currency. Be careful though; there are no real protections or regulations surrounding payments and transactions.

The Securities and Exchanges Commission (SEC) is currently reviewing an exchange-traded fund (ETF) of the Winklevoss brothers. If this is given the nod,  it will be the first Bitcoin investment vehicle to be approved by the federal regulatory body. This means it will eventually feature safer laws, rules, and protections for everyone.