Author Mark Richards
In today’s news, we take a look at Bitcoin, the digital currency. What is it, what is it used for, how can you get some and should it be used as an investment?
So far this year the world has been hit with two ‘ransomware’ attacks. The first was initially described as an attack on the NHS – then it gradually emerged that companies and organisations worldwide had been targeted. The second attack supposedly hit more than 250,000 victims in over 150 countries: major companies and organisations from FedEx to Nissan to the Russian railway system were affected. And you can rest assured that there will have been plenty of other major players who are keeping quiet about their security systems being breached.
In both cases, the ‘ransom demand’ was the same: To recover all your files safely and easily, submit the payment and purchase the decryption key. Send $300 worth of Bitcoin to the following address…
Not payment in dollars or euros or even mixed tens and twenties in a battered briefcase – but in Bitcoin, the digital currency that is becoming increasingly well-known and – in some countries – widely accepted. Today, we take a look at Bitcoin: as it says in the introduction, what is Bitcoin, and how does it work?
A word of warning
But first, yes, a word of warning: the subject can be a bit technical, especially when it comes to creating – or ‘mining’ – Bitcoin. Rest assured that the writer of this article has the technical knowledge of a fridge magnet – so I have made it as simple as possible. Secondly, and far more importantly, this article – like all articles here, – is for general interest only. You should never take what follows as any form of investment advice.
So what is Bitcoin?
Bitcoin is a digital currency – sometimes called a cryptocurrency – which is created and held electronically. It became the first decentralised digital currency in 2009 thanks to an unknown software developer (or, more probably, a group of developers) under the name Satoshi Nakamoto.
Essentially, Bitcoin is the currency of the internet – distributed, decentralized, worldwide, digital money. Unlike a traditional currency – pounds or dollars, for example – Bitcoin is issued without any central authority: there is no government, bank or company in charge of Bitcoin: in theory, it should, therefore, be more resistant to wild inflation and (if there ever are any…) corrupt politicians and bankers.
The system is peer-to-peer so that transactions can take place without an intermediary. Bitcoin can be exchanged for currencies, products and services in both legal and ‘shadow’ markets. If you ever go shopping on the so-called ‘dark web,’ you are going to need your Bitcoin wallet.
As far back as 2015, it was estimated that at least a 100,000 merchants worldwide accepted Bitcoin, and an article on Bitcoin.com suggests that 260,000 stores in Japan will accept Bitcoin by this summer. Research by the Centre for Alternative Finance at Cambridge University indicates that there are up to 6 million unique users of a crypto currency wallet, most of them using Bitcoin. Do not be surprised to see Bitcoin debit cards and Bitcoin ATMs become increasingly common in the future.
Will the bitcoin digital currency ever take over from real currencies?
It is more likely that Bitcoin will run alongside ‘traditional’ currencies. Cash remains an integral part of many people’s lives, but as Bitcoin becomes more widely accepted – and people become more knowledgeable about it – so we are likely to find prices quoted in both traditional and cyber currencies. Experts suggest that we are around five years away from Bitcoin being mainstream enough to be used alongside physical, ‘traditional’ currencies.
How much is a Bitcoin worth?
A Bitcoin is currently worth around $2,800 – approximately £2,140. Most people would have the same reaction to that: ‘Well that’s not much use if I want a skinny latte.’ True enough – if you divide one Bitcoin by a hundred it is still over £20. Even in Central London, a coffee hasn’t quite reached that level…
In fact, a Bitcoin can be divided down to eight decimal places: in common usage, the most frequently used divisions are 1/100th (a centibitcoin, or Bitcent) and a 1/1,000th – commonly known as an mBit or Bitmill.
How do I get some Bitcoin?
Surprisingly easily. There are any number of exchanges where you can buy Bitcoin: Coinbase is just one example. Alternatively, you could decide to accept Bitcoin as payment if you run a business or you could get to work and start mining Bitcoin: be warned though, it is not quite as simple as leaving your computer running overnight…
Is it a wise investment?
As we have stated above, the article is for information only: it is emphatically not investment advice. Right now, Bitcoin is an extremely volatile currency. The current value of a Bitcoin is around £2,140 but as a senior analyst at eToro – the ‘social trading investment network’ – said, “Bitcoin could easily crash to $100 (£76) a coin or surge to $10,000 (£7,600) a coin or go anywhere in between.”
I read about Bitcoin ‘splitting.’ Is it in trouble?
I am not an expert, but the answer is almost certainly ‘no.’ However, a new version of Bitcoin – Bitcoin cash – has made an appearance, apparently designed to increase the ‘power of Bitcoin’s underlying technology.’ After that the details become even more complex: the simplest observation is that Bitcoin will continue to evolve – to an outsider like me, Bitcoin appears a bit ‘geeky.’ If it really is to run alongside ‘normal’ currencies, then you would think that some way needs to be found to make the standard unit rather less than £2,140.
Are there any other virtual currencies?
Yes, probably the best known after Bitcoin is Ethereum, proposed in 2013 by a digital currency researcher and programmer called Vitalik Buterin. Like Bitcoin, it is ‘mined’ using computers and it went ‘live’ on 30th July 2015 with 11.9m coins which had been ‘pre-mined.’ According to Coindesk, the current price of Ethereum is around $226 – so around £170 and less a tenth of the price of a Bitcoin. But much closer to the price of a coffee…