- Few technologies have the ability to stir passionate online debate and baffle the vast majority of the population as bitcoin. The virtual currency has been a constant source of interest and confusion since it thrust itself into the mainstream more than five years ago.
- But interest in bitcoin is now greater than ever. Its value has soared above $10,000 (£8,000), a new high point, turning those who hoarded large amounts early on into millionaires.
- But why? Is bitcoin the future of currency? Is it currency at all? What is it for? And should I buy some? Read on to have your questions answered.
What is bitcoin?
Bitcoin is a digital currency created in 2009 that uses decentralised technology for secure payments and storing money that doesn’t require banks or people’s names. It was announced on an email circular as a way to liberate money in a similar way to how the internet made information free.
How does it work?
Bitcoin works on a public ledger called blockchain, which holds a decentralised record of all transactions that is updated and held by all users of the network.
To create bitcoins, users must generate blocks on the network. Each block is created cryptographically by harnessing users’ computer power and is then added to the blockchain, letting users earn by keeping the network running.
A limit for how many bitcoins can be created is built into the system so the value can’t be diluted. The maximum amount is just under 21 million bitcoin. There are currently just over 16.7 million in circulation, each of which was worth almost $10,700
What affects its price?
The price of a bitcoin has jumped up and down since it first entered the mainstream consciousness in 2013. That year prices rose by almost 10,000 per cent before the collapse of Mt Gox, the biggest online bitcoin exchange, sent it crashing.
Prices slowly crept up after that but have since surged again. This is largely put down to regulators appearing to warm to bitcoin and the rise of initial coin offerings – a way for projects to raise money by selling cryptographic tokens similar to bitcoins.
Who is Satoshi Nakamoto?
Satoshi Nakamoto is the mysterious creator of bitcoin and blockchain. Despite countless attempts to unmask the person or people behind the name, their identity has remained elusive.
How many people use bitcoin?
The largest bitcoin storage platform, Blockchain.info, claims it has more than 19 million cryptocurrency wallet holders. This has almost doubled from 10 million at the start of 2017.
What is it used for?
Bitcoin is has a range of uses, including funding companies, investing cash and transferring money without fees. It is commonly associated with criminal activity such as drug dealing, cyber crime and money laundering, since it can be near-impossible to tie a bitcoin wallet to any one individual.
Others simply hold their bitcoins, hoping they will accumulate in value and prove to be a lucrative investment. Its price is notoriously volatile, and early investors are now sitting on massive gains.
What is Bitcoin Cash?
In August 2017, the blockchain forked to support another cryptocurrency, Bitcoin Cash, which is optimised slightly differently. People who held Bitcoin received an equal value of Bitcoin Cash .
Should I invest in bitcoin?
Bitcoin is safeguarded against fraud and theft through independent and decentralised set up, as well as being free from transaction fees. It has also given great returns to some investors, with the price jumping from a few dollars at the beginning of 2013 to $1,100 by November 2013.
After a few level years, its dollar price soared again this year, and it has peaked at $10,000. But the price has also dropped in the past and left people out of pocket.