When the richest person in the world gives his support to a virtual currency you know it’s big business.
Elon Musk has told users of an online social media app that he thinks the virtual currency, Bitcoin, is a “good thing.”
His comments resulted in the value of Bitcoin rising significantly.
So much so, that a singular Bitcoin went from being worth £3,600 in March last year to more than £27,000 now.
As the talk of the currency has gone global, the Bank of Singapore has suggested that the 12-year-old currency could replace gold as its store of value.
However, in October, the head of the Bank of England, Andrew Bailey, warned about the unpredictability of Bitcoin, saying it makes him, “very nervous”.
With all this talk you’re probably wondering – what is Bitcoin and how does it all work?
Here’s everything you need to know.
What is Bitcoin?
Bitcoin is a digital currency that was created in January 2009. It follows the ideas set out in a whitepaper by the mysterious and pseudonymous Satoshi Nakamoto.
How does Bitcoin work?
How exactly to categorize Bitcoin is a matter ofcontroversy. Is it a type of currency, a store of value, a payment network or an asset class?
Fortunately, it’s easier to define what Bitcoin actually is. It’s software. Don’t be fooled by stock images of shiny coins emblazoned with modified Thai baht symbols. Bitcoin is a purely digital phenomenon, a set of protocols and processes.
Bitcoin mining is the process by which bitcoins are released into circulation. Generally, mining requires the solving of computationally difficult puzzles to discover a new block, which is added to the blockchain.
what is cryptocurrency?
A cryptocurrency, cryptocurrency or crypto is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of a computerized database using strong cryptography
to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership. It typically does not exist in physical form (like paper money) and is typically not issued by a central authority.
Cryptocurrencies typically use decentralized control as opposed to centralized digital currency and central banking systems. When a cryptocurrency is minted or created before issuance or issued by a single issuer, it is generally considered centralized. When implemented with decentralized control, each cryptocurrency works through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.