What on Earth is Bitcoin?

by Adam on January 26, 2014

**You can win $100 Amazon voucher after reading this post so take note**

You’ve probably been hearing quite a bit about this Bitcoin thing lately. It’s popped up on various media, news outlets and in the online realm a lot over the past few months. But what is it? And will you be exchanging your current account for a Bitcoin one soon?

One site, bitcoin.org, defines Bitcoin as a “consensus network that enables a new payment system and a completely digital money”. So far, so opaque. Perhaps the best way to look at it is: a currency for the internet.

Maybe the simplest way to explain how the currency works and how it shot to prominence is to give you a quick history lesson.

Bitcoin came into being in 2009.

It was created by Satoshi Nakamoto, a mysterious character who has never given an interview. It was trundling along nicely as the preserve of free-thinking libertarian types until last year (2013) when its value suddenly shot up by 1,000 per cent.

And I actually saw this coming coming and profited!

Here’s what I posted to my facebook account back in April 2013:
bitcoin

In case you’re curious, the value continued going up, crashed, then went on to bigger highs. I got out in October 2013 or so, having doubled my investment (although I wasn’t really investing, but rather speculating!)

Some have the rise in value of Bitcoin was partly down to the global financial crisis and in particular the financial situation in Cyprus. Their economy hit the skids and the Cypriot people were tapped for a few quid. Savers were hit by a government levy in order for their bailout to go ahead.

In light of government interference in individual’s private finances a non-centralised form (i.e. it doesn’t have a central bank) of currency completely free from government meddling suddenly seemed a lot more appealing.

If all this sounds like something you would want to get your hands on, well you can’t, because it doesn’t exist in any physical form.

As stated at the start it’s merely an online thing. If you do want to get some though, there are various ways you can go about getting some.

First you need an online bitcoin wallet

You can go to bitcoin.org and download a ‘wallet’ to your computer and mobile.

Or you can keep your wallet online like I did using http://blockchain.info/ or any other of the multitude of sites that have sprung up. Once you have a wallet you can begin receiving and sending Bitcoin to others using your unique wallet address.

So you now know what it is (sort of) and that it’s hot property (or, data really) right now but what can it be used for? Well the good news is that you can technically buy anything, the bad news is that not every site excepts it. Those that do, include sites like WordPress, Wikileaks and Reddit.

This site documents more comprehensively where you can spend bitcoins.

What kind of advantages does a Bitcoin transaction have over the regular kind?

We’ve already discussed the freedom element, in theory they should be much more secure than credit card and debit card transactions as they don’t contain personal information and Bitcoin payments contain virtually no fees. But as you might expect, there is still risks involved, like if your digital wallet is hacked or you forget where it is stored.

So is it worth investing in then? Economists seem to think that given that its price has fluctuated so dramatically in the last few months, Bitcoin is nothing more than a novelty currency…but there have always been naysayers when new distruptive technologies and concepts are created.

For the record, I’m completely out of Bitcoins for the moment. It was interesting to explore them, and it was a roller-coaster ride watching the value go up and down, but I’ve got other demands on my resources right now and wanted to get off the ride for a while.

________________________

Now, for some special news!

You may or may not have any Bitcoins but do you fancy getting a $100 gift voucher to spend at Amazon.com?

Win a $100 Amazon.com voucher

All you have to do is put your email in this form below and share this post on Facebook or Twitter.

That’s it.

You’ll be entered into a prize draw to win the voucher. The winner will be chosen on Monday 3rd February 2014.

Step 1

Share on Facebook or Twitter:

For Twitter you can click this: Tweet: Read Bitcoin 101 Lesson and win $100 Amazon gift voucher from @magicalpenny http://ctt.ec/D23m0+

For Facebook you can click this:

Step 2

Add your email address below so we can contact the winner:

The winner must have both shared the post and entered their email into the form and will find out on Monday 3rd February (and this competition is run solely at Magical Penny’s discretion)

 

Good luck!

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