You have probably been reading quite a lot about the Bitcoin currency. I really don’t like the feeling that I’m missing out on something, or haven’t been keeping up with the latest trends, so I’ve found myself wondering – should I have some Bitcoin? Where do I get it? And, more importantly, how do I spend it? However, Bitcoin does all seem a little more complicated than other currencies that I’m used to dealing in. To help demystify Bitcoin – here are five things you should know:
Bitcoin was developed as a peer-to-peer payment system, so it has some value but only if you have the technology to store and trade it. Another way of thinking about is that it is a virtual currency. It was first developed in 2009, so it is a relatively recent phenomenon.
This is a bit of a mystery. Mentions of Bitcoin first appeared in a research paper that was published in 2008. The author of the research paper was Satoshi Nakamoto, but no one seems to know who Satoshi Nakamoto is. It is believed that Satoshi Nakamoto is a name that was created by the group of people who created the Bitcoin protocol and software.
As a virtual currency there isn’t any central bank printing Bitcoin notes or producing Bitcoin coins. The value recognised as Bitcoins are created as a reward for payment processing work. This is generally described as Bitcoin mining – users offer their computing power to verify and record payments, in return for transaction fees and Bitcoins. Bitcoin miners can be located anywhere in the world, but it is becoming incredibly competitive and requires specialised technology in order to be able to be done effectively. In order to pool resources and mine Bitcoins more efficiently, many Bitcoin miners have joined together in mining pools to split the work and the reward. You can send and receive Bitcoins electronically – you need the right software to do it You store your Bitcoins in a virtual wallet.
The virtual nature of Bitcoins has been causing some concern to governments and banks around the world. Bitcoins provide a level of anonymity that make it an attractive currency for organised crime or terrorism.
There are an increasing number of places in which you can spend Bitcoins. Most of these are currently providers of online services and you can make your payment using an online transaction. The growth in merchants accepting Bitcoins is partly driven by the lower transaction fees that apply to Bitcoins compared to other forms of payments – so the Merchants will make more profit on each sale. It may be a few years yet before you need to invest in a virtual wallet to store all of your Bitcoins, but the important thing is that you can look knowledgable and nod in the right places the next time it comes up in a conversation.