A guide to Bitcoin
This guide aims to give an overview about what Bitcoin is and how it is used. In particular, we cover its definition, the concept of the Bitcoin wallet, Bitcoin mining, it’s price, trading and how to keep up to date with the latest news.
So, what actually is Bitcoin? Well, Bitcoin is a digital currency (often these are also called crypto-currencies) which is not backed by any country’s central bank or government. Still, like other currencies (such as Ethereum and Litecoin), Bitcoins can be traded for goods or services.
Transactions from one Bitcoin to another are made by digitally exchanging anonymous, heavily encrypted hash codes across a peer-to-peer (P2P) network. This P2P network monitors and verifies the transfer of Bitcoins between users.
What is a Bitcoin Wallet?
Each user has their Bitcoins stored in a digital wallet, which holds the address that the user sends and receives Bitcoins from. The Bitcoin wallet also includes a “private key” that only that user knows.
How Bitcoin works
So, there is a limit to the number of Bitcoins that can be created. The Bitcoin network is designed to mathematically generate no more than 21 million Bitcoins. The network is also set up to regulate itself to deal with inflation.
Bitcoins can be spent in many different places. Technically, these transactions are initiated by a transfer request from a Bitcoin address in the customer’s wallet to a Bitcoin address in the vendor’s wallet.
What is Bitcoin used for?
The answer to this is quite simple. Essentially, Bitcoins can be spent wherever they are accepted as a payment method.
Some countries do have concerns over Bitcoins though. For instance, Bitcoins can be used to anonymously transfer illicit funds or hide unreported income from the Internal Revenue Service (IRS). This means that the currency has been linked with illegal activity in the past. As a result of this, Bitcoin has made it its policy that transactions with “traditional” government-backed currencies, must be attached to someone’s identity.
What is Bitcoin Mining?
You might be wondering where Bitcoins actually come from. Think about it. In the case of physical money, a government decides when to print and distribute money. Yet, Bitcoin doesn’t have a central government.
Instead, with Bitcoin, miners use special software to solve math problems and are issued a certain number of bitcoins in exchange. This provides a smart way to issue the currency and also creates an incentive for more people to mine.
What is Bitcoin worth in USD and GBP?
The value of one Bitcoin is always changing. At the time of writing, one bitcoin is worth £11742.33 (pounds) or $15718.26 (USD). There are various sites where you can find out the current price of Bitcoin, one of which is Coindesk.
What is the actual Price of Bitcoin?
Actually calculating the price of Bitcoin is pretty difficult. In an Forbes article called “Why bitcoin is worth 0, 20,000, 2M or infinity”, Peter Cohan argues that you could argue that Bitcoin is worth “anywhere between $0 and infinity.” This is people will pay for it as they are afraid of missing out and they feel that Bitcoin has the potential of making the world run more efficiently.
The compound annual growth of Bitcoin between June 2011 (when it was $17.50) and December 2017 (when prices as high as $17,000 are mentioned) means that it is difficult to ignore Bitcoin and its potential. Yet, in reality, this value regularly shift dramatically up and down.
Bitcoin Price Chart
There are a number of websites to view Bitcoin’s price changing over time. For example charts.bitcoin.com. An example of this across 2017 is below:
Bitcoin Trading is the act of buying and selling Bitcoins. There are a couple of ways to trade Bitcoin:
- Buy the cryptocurrency itself and hope to sell it for a profit
- Speculate on its value without ever owning any coins (this is how spread betting and CFDs work)
Where can you read Bitcoin news?
There are a number of sites where you can read the latest news about Bitcoin. Here are a few sites that we feel give some useful insights about the crypto-currency: