What is a Bitcoin?
Bitcoin is an online currency, with no real coins or notes. It’s often abbreviated to ‘BTC’, in the same way Great British Pound is written as ‘GBP’. Bitcoin isn’t controlled by a bank, but by the network of people who use it. It was created in early 2010, so it’s a very new currency but it’s growing rapidly.
How do you get Bitcoins?
There are 4 ways to get Bitcoins. You can:
• Buy Bitcoins with ‘real’ money
• Accept Bitcoins as payment
• Exchange Bitcoins with someone near you
• Earn Bitcoins by ‘mining’
The first three sound pretty simple, but ‘mining’? Don’t worry, there are no pickaxes or canaries involved. Mining is how new Bitcoins come into circulation: your computer works in the background to solve an equation for the Bitcoin network. In return, you’re ‘paid’ in Bitcoins. It’s a bit like getting paid by your bank for doing their sums.
In the early days of Bitcoin you could mine with an ordinary computer. Now there are more users, it’s generally done by specialists with very powerful computers – making it harder to get the coins, and therefore increasing their value.
Where do you keep Bitcoins?
Bitcoins are kept in a virtual ‘wallet’ on your computer or in a smartphone app. You use this to send and receive payments. Keep a backup copy somewhere – if you lose your ‘wallet’, you lose your Bitcoins. When the price of Bitcoins rocketed, one individual realised he’d thrown away a computer hard-drive with Bitcoins on it, and had no back up. Those Bitcoins were worth £4.6m…
What is a Bitcoin worth?
The price has gone up and down a lot since Bitcoin was created. In November 2013 the price hit a high of over $1100 (£700) a Bitcoin, but since then has fallen to around $230 (£150) each.
What can you buy with Bitcoins?
In the beginning, Bitcoins were worth so little that no one really spent them on anything. The first physical items bought were two pizzas in April 2010, which cost 10,000 Bitcoins. But as the number of ‘traders’ has grown, some large companies have started trialling Bitcoin acceptance in the US - including Microsoft, Dell and Expedia.
Although the currency is still quite volatile, the amount of new users and large companies working to accept Bitcoins means that it could well be here to stay.