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What ac­tu­ally is Bit­coin?

It’s what’s called a cryp­tocur­rency, a dig­i­tal cur­rency gen­er­ated and con­trolled by en­cryp­tion tech­niques. This means new bit­coins can’t just be gen­er­ated. Early in its life peo­ple were able to ‘mine’ them, crunch­ing through po­ten­tial bit­coin ad­dresses un­til an un­claimed one was found, but new bit­coins are now, sadly, few and far be­tween.

Why does this mat­ter?

Bit­coin’s anony­mous na­ture has made the cur­rency very pop­u­lar – and not only with hack­ers like those be­hind the Wan­naCry virus (see page 10). It ap­peals to peo­ple who need to make trans­ac­tions out­side of tra­di­tional fi­nan­cial in­sti­tu­tions, and its in­creas­ingly be­ing used as a way to pay for goods and ser­vices in­ter­na­tion­ally. Ad­di­tion­ally, the lack of new bit­coins means a vast amount of de­fla­tion; 2017 has seen its value in­crease rapidly.

Just how valu­able is it?

Ridicu­lously so. In 2010, early in Bit­coin’s life, a Florida man paid 10,000 bit­coins (around $41 at the time) for a pair of piz­zas. To­day, with Bit­coin prices top­ping $2,000 each, those piz­zas would be worth over $20 mil­lion. With the ben­e­fit of hind­sight, that is some pricey pep­per­oni.

Let me buy in!

Hold your horses. Bit­coin’s price isn’t only go­ing up; it’s hit sev­eral troughs over its life­time, and there are ab­so­lutely no guar­an­tees that its price will con­tinue to rise. The world’s fi­nan­cial reg­u­la­tors are also eye­ing it sus­pi­ciously, par­tic­u­larly given that its anonymity props up a mar­ket­place for il­licit and il­le­gal goods.

Any other op­tions?

Bit­coin may be one of the ear­li­est cryp­tocur­ren­cies, and the main one to break through, but there are hun­dreds more that might be worth a gam­ble. Although it’s a com­plex and some­times toxic en­vi­ron­ment to play in. Check out cryp­to­ if you’re in­ter­ested in check­ing out prices and po­ten­tially pur­chas­ing some for your­self.

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