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Bitcoin Explained - What Is It And Do I Need It?

by Carlton Whitfield. Published Mon 06 Nov 2017 23:48

Bitcoin is a digital currency, or “cryptocurrency”, that is used peer-to-peer with no middleman; in other words, there is no bank or other financial institution involved in a transaction between two parties.

Think of it as going into a bar and buying a drink - the barman gives you your drink and you hand him your money. It is a straight exchange of values, but with bitcoin it all happens online.

Bitcoin is today only one of many different cryptocurrencies, but it was the very first, with many having jumped on the bandwagon in recent years. It was invented by Satoshi Nakamoto who proposed it in 2008 and launched it at the beginning of 2009.

However, Satoshi Nakamoto is believed to be a pseudonym and it may be that a group of people were involved. Although several people have subsequently claimed to be Nakamoto, the truth is still shrouded in mystery.

Who Accepts Bitcoin As Payment?

The increasing prominence of bitcoin is leading to more companies accepting bitcoin as a fluid currency. One of these examples is Richard Branson’s Virgin Galactic, which includes Virgin Mobile and Virgin Airline. It's not the only major business to accept it; Microsoft accepts bitcoin on Xbox and the Windows store, and you can pay for products on many Shopify stores with it.

All bitcoin is also accepted as a stake for bitcasino.io, an online casino which has some bitcoin-themed games.

While it is presently valued at around $1,900 you don’t have to spend it all at once – you can spend fractions of a bitcoin. Some companies are even storing it as an insurance against ransomware attacks from hackers who demand payment in bitcoin so that their activities cannot be tracked.

How Are Bitcoins Produced?

Bitcoins are produced by a complex process known as mining, a form of gathering that can be completed on any computer. It can be too complicated for many and it isn't advised, with miners having to run a computer for at least three years non-stop in order to yield success. Even then, the miner might not strike it lucky.

Many bitcoin miners prefer to join a mining pool – a type of syndicate – where the proceeds of any bitcoins mined are split between the group according to the amount of work each member’s computer has completed.

The easiest way to gather bitcoin is to buy them from exchanges, but even here you have to be careful. Many exchanges have failed, most closing without explanation, including a high-profile exchange known as Mt Gox in which investors lost $450 million worth of bitcoin.

The value of bitcoin has fluctuated wildly as it is not subject to any financial regulation. At the beginning of 2017 it was worth around $1,000 but today has climbed to around $1,900, so some investors have made a lot of money.

However, it is similar to foreign exchange trading in that it is equally easy to lose a lot of money because the value changes rapidly according to supply and demand.



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