Bitcoin – do you understand it? Do you care?
A (very) simple guide
There has been a lot of press in recent weeks about the bitcoin, cryptocurrency, and how one bitcoin is now worth in excess of £6,000.
This led me to question whether I had any idea really as to what bitcoin was or how it worked as a currency.
So, what is bitcoin?
Bitcoin started in 2009 – it’s a new currency – a cryptocurrency – one that fluctuates in price like any other, but is not tied to any particular jurisdiction or country. The selling point is that transactions involving bitcoin do not involve any banks, fees, and you can remain anonymous throughout.
What can I buy with bitcoin?
Whilst not turning up on every street and in every shop, more and more places are accepting them and there are even cash points which give out bitcoins. In theory bitcoin could become as common as any other currency.
My local shop won’t take a £4000 note so why would it take a bitcoin?
The attraction to small businesses is the lack of fees attaching to the transaction.
A bitcoin can be broken down into fractions of the whole to pay (in the same way that a £ can be broken down into pence) for smaller items so it is not unfeasible that businesses will be interested in trading in them.
How do I get one?
Much like any currency, save for one exception:
- It is possible to buy and exchange bitcoin
- It is possible to transfer them to people via computer/phone
- You can “mine” for bitcoin by using computers to answer difficult puzzles. If you win you get given a certain number of bitcoins.
Where do I keep my bitcoin?
Digitally. A virtual wallet is set up which is identified by a number not a name. All bitcoin transactions are recorded and can be viewed publicly (https://blockchain.info/) but as your name is not linked to the account no-one knows who you are or what you are doing!
Should I care?
Perhaps. Cryptocurrency has survived almost 9 years now and despite some bad press shows no indication of going away. At the time of writing this article one bitcoin equates to £6900 and the trade in bitcoin is strong (it was just £4300 a few weeks ago).
I suspect that its value will flat line at some point and decrease as the extreme heights it has reached are unlikely to be sustainable, not least through increased government scrutiny of its reach and through own schisms in the bitcoin mechanism itself. In recent weeks, bitcoin has experienced its own internal issues with the creation of bitcoin cash and bitcoin gold, off shoots of the original bitcoin but demonstrative of differing views on how the virtual currency should evolve.
As the world becomes more and more digital in its approach there is no reason why a virtual currency should not become a more recognised method of transacting business over the next few years. This could lead to interesting legal challenges.
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