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What is Bitcoin?

By James Tennant

April 2018

4 Min Read

What is Bitcoin?

Over the last few years, Bitcoin seems to have become much more than a cryptocurrency. Any time spent on Bitcoin-related Reddit forums or browsing through the myriad of new cryptocurrency YouTube channels will show you that many people believe it has transcended to become the symbol for a social and financial revolution across the world.

Advocates say that it's going to take power and wealth back from the few and share it with the many. Detractors believe it's nothing more than a fraud, a Ponzi scheme, a bubble that's bound to burst soon.

Well, in this article we hope to help shed some light on the world's biggest and most popular cryptocurrency and answer some of the big questions.

What is Bitcoin?

Bitcoin was invented by an anonymous person, or group of people, known by the pseudonym Satoshi Nakamoto. It was the first decentralised cryptocurrency (ie; the system works without a central bank or controlling power) built with blockchain technology and is considered a peer-to-peer electronic cash system.

It has become almost a byword for all cryptocurrencies, in the same way that people say 'iPad', or 'iPhone' instead of 'tablet' or 'smartphone'.

There is a finite amount of Bitcoin in the world (21 million coins) and, these days, it is often considered a store-of-value (a digital version of gold) rather than a currency because there are faster and cheaper cryptocurrencies (in terms of transferring the coin from one place to another) around that can perform the job of a 'currency' far better than Bitcoin.

How does Bitcoin work?

Bitcoin is a decentralised cryptocurrency built on blockchain technology. To really answer this question, we'll need to explain a few things first.

  • What is a cryptocurrency?

A digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets (thank you wikipedia).

  • What is the blockchain?

It is a continuously growing list of records, called blocks, which are linked and secured using cryptography. It has been developed to store data or digital ledgers for transactions, deals, and contracts – basically, any information that needs to be registered separately, kept securely, and, if necessary, to be checked. There isn't just one overall blockchain (companies may create their own blockchains), nor is there one central place from which any given blockchain can be accessed and tampered with.

  • What do we mean by decentralised?

The easiest way to explain this is that Bitcoin isn't owned by any one person or organisation. It runs itself and exists across the entire network of people who own and use it.

That means Bitcoin can never be tampered with, destroyed or stopped (well, in theory, it could, but it would require simultaneous access to the entire network at the same time, and computing power that does not exist). All transactions across the network are visible to everyone and completely secured against outside interference.

Here is a link to Bitcoin.org. They can explain in layman's terms how it all works from a technical standpoint.

How do you get a Bitcoin?

This is where we start to tread murky, potential financial-advice waters (see disclaimer below). There is currently no easy way to get Bitcoin, as in “pop-into-a-shop-and-buy-one” easy, although one company seeks to solve that problem in the coming months. And it's even harder to get your hands on 'altcoins' (the term used for any cryptocurrency that isn't Bitcoin).

However, in the interest of being helpful, we'll tell you how you can do it below:

  1. Sign up for an exchange that lets you buy Bitcoin with fiat currency (GBP, USD, CAD etc.) such as Coinbase. This process requires ID verification - you'll need your passport, or driver's license, and can take a little while
  2. Buy Bitcoin using bank transfer or a credit card
  3. Move your Bitcoin from where you bought it to a secure desktop, paper, mobile or hardware wallet

You will need to do research into each of the exchanges, the cost of bitcoin, and the benefits of different cryptocurrency wallets – there's no way around this bit. If you're serious about getting involved, you will need to put in the hours to learn about it all.

Why would you use Bitcoin? 

Because it's fast, cheap to use and super secure (although, as we mentioned above, there are newer cryptocurrencies that are faster and cheaper than Bitcoin now).

Say you wanted to send money to your friend living on the other side of the world. You'd either use a bank or a company like Western Union to do that. The transfer would be slow (often taking several days), and relatively expensive too. 

With Bitcoin, the transfer would take a matter of minutes and cost a lot less. There would also be no issues incurred with changing one currency to another. Bitcoin in Canada is the same as Bitcoin in Japan. It's a global digital currency. 

Is it too late to get involved in Bitcoin?

This is a very, very common question. The answer is, honestly, no-one really knows.

People were asking this question when each Bitcoin reached $1000 in value. Now it's many times higher than that.

When you consider that there is only around 1% of the world's population actively involved in cryptocurrencies, you could make a strong argument that even now (April 2018), people who get involved in Bitcoin, Litecoin, Ethereum etc. could still be considered 'early adopters' - NINE years after the creation of Bitcoin. 

Put it this way - mass adoption of cryptocurrencies hasn't even begun to occur.

What is one Bitcoin worth?

The price of any cryptocurrency is extremely volatile. It's not uncommon to see fluctuations of 10-30% in the price of any coin in a 24 hour period. That makes answering this question quite tricky.

However, at the time of writing, Bitcoin seems to have found support at the $9,000 - 9,500 range, after a previous spike up to $20,000 in late 2017.

So there we have it - a very basic introduction to Bitcoin. Are you a cryptocurrency enthusiast or not? Let us know in the comments below. And make sure to check out our introduction to Ethereum by clicking the button below.