What is BItcoin (BTC)?
As the digital currency Bitcoin surges in popularity, curious investors and entrepreneurs alike are watching closely to see what happens with the fluctuating prices. Don’t understand the basics of bitcoin? Here’s what you need to know:
What is Bitcoin?
Unlike other currencies, such as the pound or dollar, Bitcoin only exists on the Internet – and can therefore only be used for online purchases. Described a cryptocurrency, Bitcoin uses complex encryption to store your balance, and even confirm and verify transactions. Much like the currency itself, the technology behind Bitcoin relies on a peer-to-peer network rather than an official authority. This means that any changes to Bitcoin must be agreed by the community, and no individual person can solely develop the currency. Technical details of Bitcoin are also agreed by the user base, so any changes must gain the support of the majority.
A brief history
First envisaged as a currency controlled by a community rather than a central authority, the idea of Bitcoin was originally put forward by Wei Dai in 1998. It was only in 2009, 11 years later, that a figure going by the name of Satoshi Nakamoto created the first detailed template of a peer-to-peer currency. After the mysterious Nakamoto left the project in 2010, the task of refining the currency was taken over by an increasingly large user base. Although the largely anonymous Nakamoto is credited as the founder of Bitcoin, the currency’s current form is an advanced descendent of his earlier work.
How does Bitcoin work?
Bitcoin relies on a peer-to-peer community, but it operates much like any other type of money. After creating a wallet, much like Apple Pay or PayPal, users are given an address. A single-use code, addresses are similar to giving your bank details or PayPal email address to your friends before each transaction. These transactions are then processed in the ‘block chain’, a public ledger with a record of the balances of wallets. It’s this system that makes Bitcoin unique, and not reliant on a central banking authority. Responsible for updating balances and the overall location of money, it’s the block chain that forms the inner workings of the Bitcoin currency.
Are there any other cryptocurrencies as popular as bitcoin?
Other cryptocurrencies also exist, but bitcoin is the most popular one right now. Other popular cryptocurrency includes Dogecoin, Ethereum, Bitcoin Cash, Ripple, Litecoin and Monero. Digital cryptocurrencies are being created for all types of uses like PotCoin, which is a digital currency and banking solution for the global legal marijuana industry. There’s Titcoin, a cryptocurrency for the adult entertainment and sex worker industry.
What are the legal uses of bitcoin?
Most transactions on the bitcoin network aren’t illegal — it’s typically people buying and selling bitcoin to each other. People in countries with high inflation or unstable governments are putting their money into bitcoin to avoid losing their savings. It’s also used to transfer large sums of money internationally. It is quicker to transfer bitcoin than it is to go through a bank transfer, which can take weeks.
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