Bitcoin has been around for a while now, but what is it exactly and how does it work? Here's all the info you need...
So, what is Bitcoin?
Bitcoin is a virtual currency – i.e. it doesn’t actually exist in the physical world, but is essentially internet-based money. It’s also decentralised, meaning that it isn’t controlled or manipulated by a central bank, in the way that traditional currencies are. There is an upper limit on the number of bitcoins that can ever be created.
Who invented it?
It was developed in 2009 by an anonymous programmer called Satoshi Nakamoto, which is believed to be a pseudonym.
What are the advantages of using this currency?
You avoid credit card, cash handling and foreign exchange fees, and there is meant to be less of a danger of fraud when using Bitcoin. It’s also more predictable, since a central bank cannot inflate its value via quantitative easing.
And why are some people wary?
Although each payment is registered on a list, intended to make it more secure, the actual transactions remain anonymous, so Bitcoin has been used for illegal activity in the past.
Why is it suddenly so popular?
Regulators in the US and Europe have been positive about the currency, which has boosted its legitimacy and increased the attention it has had from the financial community. The price of Bitcoin has also risen, and more people have started buying it, which has further increased its value. Thousands of businesses now accept it as a legitimate method of payment.
How do I buy Bitcoin?
You can buy Bitcoin on an online exchange. But the most popular of these, MtGox, was recently hacked and “lost” around 750,000 bitcoins, so people who had bought and stored bitcoins on its exchange lost out. There is always the danger that this could happen to other exchanges.
All sounds a wee bit hectic to us. We might just stick to a trusty old debit card for now…