What is Bitcoin?
Bitcoin, sometimes referred to as Digital Currency or Crypto Currency, is revolutionising the way we pay for things.
Why do we need Bitcoin?
- Its faster, each transaction only takes 10 minutes to process
- Cheaper to use for merchants and consumers
- More secure as you don’t expose personal details to 3rd parties
What is the background?
Bitcoin was created by an anonymous developer known as Satoshi Nakamoto who released the system in 2009. Since then it has been gaining support throughout the development community and more recently endorsed by merchants such as Virgin and Overstock. Similarly to the internet, Bitcoin is decentralised in nature so no one owns the system, however it is kept operational by a network of Miners.
What do Miners do exactly?
They provide the Bitcoin network which process transactions and are subsequently rewarded with new “minted” bitcoins. To ensure transactions are genuine each person sending a payment uses a private reference or “Key” which signs and authenticates the transaction. Miners decrypt transaction details and confirm them to the network. This information is held in what is called the Blockchain.
What is the Blockchain?
The Blockchain is core to Bitcoin; a publicly accessible ledger which contains a historic list of transactions between bitcoin holders. As transactions are processed Blocks are added to the Chain.
How do you buy bitcoins?
The easiest way is to buy them from another person (or through an exchange where you’ll pay a handling fee) alternatively you join the Bitcoin network and mine new Bitcoins.
How do I use bitcoins?
To send and receive bitcoins you need a Bitcoin Wallet. These are available online (via a web based service like blockchain.info) via an app on your computer or mobile or stored offline on what are called paper wallets (cold storage). Its very important that you secure your wallet with a strong password and use as many security techniques as suggested by the Wallet provider.
How many bitcoins are there?
Fixed at 21 million by design, which become more difficult to mine as time goes on. Its estimated the final bitcoin will be minted circa 2140 at which point Miners will begin receiving a nominal fee for processing transactions.
Are there any downsides to Bitcoin?
Bitcoin hasn’t hit mainstream yet but we believe it will over the next few years. There is massive commercial interest and development within tech companies working hard to improve the way customers and businesses use Bitcoin.
At time of writing Bitcoin is being discussed by government regulators across the globe and until consensus is reached there is little or no protection against lost / stolen Bitcoins.
Price volatility has been cited as a concern for Bitcoin however as the ecosystem matures, market cap increases and fluidity improves this is expected to become more stable. Merchants are protected against these spikes via service providers such as Coinbase and BitPay who convert bitcoin payments to national currency at point of sale.
As governments realise the considerable benefits to digital currencies and regulators advise accordingly we expect this market confidence will encourage greater adoption from businesses and customers alike.