Bitcoin is a new currency, created in 2009 by an unknown person, often called Satoshi Nakamoto.
A huge advantage for Bitcoin is that there are rarely transactional fees, and when buying things or paying for services, it is anonymous as personal information is not revealed in transactions, which makes the service incredibly private.
It is a system used to transfer money internationally cheaply and quickly as it is not limited or tied to any country or distributed by any government.
Bitcoin itself is stored in the Blockchain, which is effectively a wallet where you can deposit and withdraw your bitcoin.
Over the past few years, the cryptocurrency has been snowballing in popularity, with one bitcoin being worth £4,178 at the time of writing. As a point of comparison, in 2010 when the currency first had value, the highest price for one bitcoin was 26p. In April of 2017, a single bitcoin was worth £822.83 – increasing five-fold in a mere six months.
Bitcoin is finite – only a total of 21,000,000 will ever be made. The coins are ‘mined’ by people with a high understanding of coding who use special software to solve mathematical problems.
The currency is designed to inflate and deflate in reflection of the demand, meaning that whilst there is a limit, there could not be a deficiency.
As users are free to make transactions on their own terms with no third-parties, it is becoming more and more popular as a choice for people who want freedom and control over their money.Maikel, a user of Bitcoin, opened a wallet in 2016 after watching documentaries about the cryptocurrency.
“I think I first heard about it in 2013, but I chose not too read into it any further. Later, I decided to convert €600 (£535.82) of my savings into Bitcoin. I now have 1.95 bitcoin (£8,393.67), after my initial investment and a bonus from my job”.
Attracted by the privacy of the currency and its transactions, the Dutch administrator now encourages others to research bitcoin for themselves and to invest, having given his family members each a small amount for Christmas.
As the currency is still quite rare, especially in Europe, many people are not aware of it, and do not know what can be done with it.
Despite only using bitcoin for a year, he is now an enthusiast.
For Maikel, advantages include bitcoin being a way to secure yourself for possible big economic problems in future, and a way to divide money so that it is not all in banks to give them, and governments, less power.
“Bitcoin is for everyone, money for the people, literally everyone can use it. There’s no real politics behind it, it’s maths and super smart technology, which many people are starting to trust more than people/banks”.
Understandably, others are more cautious of the currency due to it being untouchable, unregulated, and new – not to mention its complex structure.Whilst aspects of bitcoin do require a lot of in depth tech understanding, it is accessible at a lower level also as users can use the system to trade goods and send money internationally – a house in Essex recently went on the market with buyers having the option to pay either £375,000 or 82.55btc.
Those in the housing market expecting bitcoin to become a more common option within the next five years. Bitcoin is also accepted by other traders, such as Whiffy’s Fried Pies in Portland, Oregon, where Flickr user Francis Storr reported they get “two or three bitcoin transactions every day”.
One aspect of the currency which seems to put off new users is its complexity, and how expensive it can be to buy into.
However, Maikel describes bitcoin as ‘easy to use’ once you understand how transactions work, and how to use it.
As there are many ways to store and spend bitcoin, there are many options. Although, similarly to cash, it is possible to lose your wallet (and it’s contents) if the password is forgotten.
The future of bitcoin is still quite unknown, and many tend to speculate, including calling the way the value of the currency is known to both raise and drop very quickly.
Whilst the currency is increasing in value and becoming a popular mode of investment, there is still a risk with it being 100 per cent virtual – if Bitcoin crashes, there is a very real risk that users will be left with nothing.
Featured image by Coindesk via Flickr CC