Bitcoin is a digital currency. It’s created and held online. There is no bank, individual or organisation that controls it. They aren’t printed, lost or stored in vaults. They are produced by ‘miners’ people and organisations with huge computing power running software that is designed to solve complex mathematical problems. Bitcoin was the first Cryptocurrency and the most famous, but it’s not the only one out there. Others include Ethereum, Litecoin and Verge all based on similar cryptographic technology, but looking to solve different problems.
What is Bitcoin?
Why is it different from normal currencies?
As there is no physical currency bitcoin is used to buy things electronically. In this sense it’s much like dollars in your Amazon account. It’s an amount of money represented in the digital world. Bitcoin isn’t as widely accepted as many fiat currencies but it’s starting to make an impact.
Many businesses are recognising the lower costs the currency provides, that enables them to undercut their competition without lowering their margins. The currency is currently been hoarded at the moment as the value of the limited number of coins grows. This pattern of holding rather than spending is slowing the growth and adoption of bitcoin.
What is mining?
Mining is the simple term used for using your computer system to try and solve complex mathematical problems. These problems are like finding prime numbers, whilst it can be easy to find low prime numbers, the larger numbers take a lot longer to figure out so we need computers to help us.
Anyone can install mining software on their PC but it’s unlikely you will earn any bitcoins. The person who finds the answer to the problems will win the bitcoins and you will be competing against companies who have hundreds of pieces of hardware working simultaneously. We are currently half way through the release of the 21 million bitcoins and the calculations are already very complex.
How do I buy bitcoin?
Firstly you need to create a wallet, have a read of our guide here to choose which wallet is best or download Electrum now. Once you have a wallet you need to decide which broker to buy your coins from. These are like online Bureau de Change offices.
Many of these will have extensive customer verification processes such as submitting a picture with your name, signature and ID. This is part of the strict “Know Your Customer” laws and shouldn’t put you off. Many of you will have already been through this with a bookmaker or credit card company.
Like Bureau de Changes for foreign currency many have widely different rates you can use a broker such as bittybot.co. This comparison site for bitcoins will allow you to find the best price out there, however they are not always the easiest. So we recommend using Coinbase.com for easy debit card purchases. Once you’ve found a broker and completed verification, you will be able to send them funds and they will send bitcoins to your wallet.