I was fixing a laptop screen in Sutton Coldfield last week when the customer asked me what a Bitcoin is. I thought I would share my answer as a blog post.
Bitcoin is a virtual version of money used on the Internet. There are no actual coins or notes, it is just a string of numbers. They are “minted” using powerful computer programs to solve complex Maths. This process is called mining. You can read more about mining here.
Each coin has a unique fingerprint, and a specific place in a public ledger called a Blockchain. When you buy a Bitcoin (or part thereof) you are buying a spot in this Blockchain. There is no central bank and no government controls. Transactions happen digitally from person to person. You don’t even need to use your real name, just a temporary email address. This means there is no authority in charge so financial transactions are hard to trace and impossible to refund. This is why Bitcoin has been used for illicit activities, like Ransomware demands. Also, if someone hacks your computer and steals your coins there is very little you can do about it.
Real money printing is controlled by the government; Bitcoin can be created by anyone with access to powerful computers and the internet. The computers are set to solve hard cryptographic puzzles, and these get harder and harder as more Bitcoins enter circulation, taking more processing power and even more electricity!
There are other types of cryptocurrencies available, but Bitcoin is the most famous. Interestingly there is a limited supply of Bitcoin, so as demand increases the price rises.
Anyone thinking of investing in Bitcoin or another cryptocurrency should be very careful. Their values are very volatile, with the ability to plummet as quickly as they shoot up. While I have been writing this article the price of one Bitcoin has dropped from £10,000 to £7600.
Caroline The ‘PuterTutor