Cryptocurrency is the hot topic in the finance industry and as more news outlets and TV shows lay focus to this area of economics, you may have been hearing more and more about a currency called Bitcoin. Bitcoin was the very first crypto or digital currency and whilst there are now many others such as Litecoin and Epherium, Bitcoin is the currency which has garnered the most attention.
Digital currency, and Bitcoin in particular can be a hard concept to get your head around and so we have put together a short guide about what Bitcoin actually is.
What Is It?
In Lehman’s terms, Bitcoin is a currency which only really exists in digital form, there are physical Bitcoins out there, but these are pretty rare. The basic idea is that there are 12,446,725 Bitcoins in existence, and 21 million in total. These Bitcoins, when first released, were planted into software algorithms which someone had to solve in order to extract or ‘mine’ the coins. Once the coins were mined, they had a market value and they could be used to buy and sell online. Because there are so many Bitcoins about now, many people have started to invest in them with real cash, giving them a market value which moves up and down.
Can I Use It?
Originally, Bitcoins were only really used for transactions on the deep web but given their popularity and acceptance as a currency, more and more vendors are accepting this digital payment. You can use Bitcoins for charitable donations, pizza delivery and even online clothes purchases and more vendors are sure to pop up as the months roll on.
How to Buy Them?
You can mine for Bitcoins if you have the acumen and the high powered computers needed to solve such high level algorithmic problems. Alternatively, you can buy Bitcoins from an exchange such as Mt.Gox, here you can both buy and sell Bitcoins.
The key benefit to Bitcoin is that there is no requirement for middle men such as banks, the coins are mined and then sold on the world market. The benefit of this is that there is no currency conversion costs which means that transferring money or Bitcoins across the seas has become far easier. Another benefit of Bitcoin is that there is complete anonymity and nobody knows anything about the Bitcoin owner apart from their wallet ID. Whilst this has lead to Bitcoin’s popularity in illicit dealings online, it can lend itself to a more secure and protected way of holding your cash.
The general opinion of Bitcoin was that it would be a short lived idea but when the price hit $2,000 earlier this year, and later $5,000, analysts, governments and financial experts sat up to take notice. Currently Bitcoin’s popularity is moving at an alarming rate and investors, vendors and governments are staring to get involved and see it for what it really is, the currency of the future.