So who IS the Bitcoin $15 billion supergeek?

Why is a currency that doesn’t exist in the real world suddenly the hottest ‘investment on the planet? Is it's destined to end it disaster? And the most intriguing question of all..

You can’t touch, see or smell it. No one owns or controls it. No one regulates it. Yet Bitcoin, the world’s craziest currency, is supposedly worth nearly €230 billion. In the past few days, the price of a Bitcoin soared to a dizzy new height of nearly $20,000 (€17,000), making multi-millionaires of some early investors, as well as a reported $15billion (€12.75billion) fortune for its mystery creator.

To its fans, it is a brilliant invention that will free mankind from the tyranny of corrupt banks. To its critics, it’s a huge hype on a par with 17th-century Tulip Mania that poses a terrifying threat to the financial system.

To most of us, it’s just baffling – so here is everything you wanted to know about the Bitcoin Bonanza, but were too afraid to ask.

Whisper it quietly but I’m not even sure what a Bitcoin is

It’s a virtual currency, so there are no actual notes and coins – instead, you are given a credit entry for your Bitcoins in a vast online computer ledger, which has an address that is identified by a string of digits and letters. In practice, most Bitcoin holders have an online wallet, which functions like a real one, in that you can open it on your PC or smartphone and see how much of the currency you have. These wallets are protected by passwords and authentication codes.

I see... I think. But who creates the Bitcoins and how?

They’re produced by ‘miners’. It sounds like a strange term but it’s not a bad analogy, because the current Bitcoin fever is a bit like the California gold rush of 1849.

Rather than brawny miners with picks and shovels looking for nuggets, Bitcoin miners are brainboxes hoping to strike virtual gold. When setting up Bitcoin, its creator decreed that only 21million of them can ever be unearthed. The miners do this by using their computers to solve fiendishly difficult maths puzzles. Each time their computers come up with a correct answer, the prize is a Bitcoin.

There are 16million in existence now and the puzzles are getting harder and harder.

Well, I got an A in maths at school. Can I become a Bitcoin miner?

Not unless you’ve morphed into a computer wizard, no.

I haven’t. Can I buy some?

Yes. If you can’t afford a whole one, you can buy fractions (just like a cent is a fraction of a euro). You can go to a specialist broker or Bitcoin exchange and set up a virtual wallet which you connect to your phone and email. You will be sent a text message and an email to confirm it’s you, then you link it up to your bank account.

In theory it’s simple, but users say in practice there can be annoying glitches and high charges: just like when you buy foreign currency, you will have to pay commission of between two and five per cent.

There are also Bitcoin ‘cashpoints’ in some local corner shops in the UK, though reports this weekend suggested many were not functioning due to high demand.

To use these, you have to create a digital wallet. It generates a digital address where your currency is held, which for ease of use is also converted into a QR code – a type of barcode – that shows up on your smartphone.

At the Satoshi point, there is a touchscreen with the option to buy Bitcoin. You hold your QR code up to the screen, which scans it to find your account. You can feed notes into the slot, just as if you were making a deposit at a cashpoint, and your digital wallet app should register when the payment has been received.

Can I spend Bitcoin in shops and restaurants?

In theory, yes, though many mainstream retailers don’t accept them. Steam, the world’s biggest video game store, stopped accepting it as a payment method a couple of days ago, due to ‘high fees’ and volatility in the value of Bitcoin.

Is it very volatile then?

I’ll say. Earlier this month, the value of a Bitcoin hit $10,000 (€8,500), which most people thought was astoundingly high – only to nearly double this week at one point to almost $20,000, before lurching down again by around $5,000. If the dollar or the euro behaved like that, there would be utter chaos on world financial markets.

I’m still tempted to buy Bitcoin, but do I have any comeback if something goes wrong?

No. With ‘real money’ in banks there is some consumer protection. If a lender goes bust in Ireland, up to €100,000 of a customer’s money is protected, and you might get some money back if there has been a fraud, depending on the circumstances. But there is no safety net with Bitcoin.

Who’s the mastermind behind it?

Ah. That’s literally the $15billion question. The identity of the supergeek who came up with the concept in 2008 remains a tantalising secret. Whoever it is, they are believed to have a holding of around a million Bitcoins theoretically worth more than $15billion after this week’s surge. That would make our reclusive techie an exceptionally wealthy computer geek.

Bitcoin’s inventor goes by the pseudonym Satoshi Nakamoto, and claims to be a 42-year-old Japanese male.

He has lent his name to the smallest fraction of the currency – a hundredmillionth of a Bitcoin is known as a ‘Satoshi’. But Nakamoto’s true age and nationality are unknown – and it is perfectly possible that ‘he’ is a she, or even a group of individuals.

Surely there’s an inkling who it is?

The latest name in the frame is Elon Musk, the billionaire tech investor behind electric car firm Tesla and a co-founder of PayPal. Mind you, there isn’t any evidence beyond the fact that Musk is fond of futuristic wheezes.

Musk denies he is Satoshi and says he was given some Bitcoin but lost them. Others named as possible Satoshis include an obscure US computer scientist called Nick Szabo.

In 2014, there was speculation about a sixtysomething Japanese-American computer engineer called Dorian Nakamoto living in California with his nonagenarian mother.

Both denied it and the inventor of Bitcoin remains as elusive as the Scarlet Pimpernel.

You said Musk lost his Bitcoin. Is that possible?

Yes. Ask Paul Bedford, 34, an IT consultant from Essex and a former Bitcoin miner. He excavated 41 Bitcoins – a cache that would be worth around £500,000 (€569,000), if only he hadn’t chucked out his computer and lost them all. ‘At the time, they were so worthless it didn’t bother me too much,’ he said yesterday. ‘I got rid of that computer years ago so there’s no chance I’ll ever find them.’

James Howells, a Welsh IT worker, made a similar mistake, though in his case it was far more costly. He threw out his hard drive in 2013, forgetting there were Bitcoin then worth ‘a few hundred thousand pounds’ on it. The price rise of the last few days pushed their value up to a theoretical £74million (€84million), but his fortune is buried under thousands of tons of rubbish at a dump in Newport. Howells has even offered the council £7.4 million – a 10% cut – if they can dig it up for him. The council says it is not possible.

That’s tough. But haven’t some ordinary people become Bitcoin millionaires?

Prepare yourself for some serious Bitcoin envy. Now 19, Erik Finman from Idaho was only 12 years old when he spent a $1,000 (€850) cheque from his grandma on Bitcoin. He is now a Bitcoin multi-millionaire, with a hoard worth around $6million (€5.1million), living in San Francisco where he is working with NASA to launch a time capsule into space, as well as devising his own virtual currency. He assured The Mail on Sunday yesterday that his life is ‘not all yachts and Lamborghinis now’. Perish the thought. Not quite in that league, but still a big winner, is Alessandra Sollberger, a former Goldman Sachs banker based in London, who bought 400 Bitcoins in 2012. The Oxford University graduate, now 29, missed out on the recent price surge by selling most of them in 2013 and 2014. But she still made an £80,000 (€91,000) profit and used it to launch her own business, a superfoods company called Evermore, in 2015.

She has held on to four Bitcoins, worth more than £45,000 (€51,000), and says she does not regret selling the rest, because she believes the Bitcoin bubble is about to burst.

But beating all these are Tyler and Cameron Winklevoss, the US twins who were at war with Mark Zuckerberg over who created Facebook. The pair spent $11million (€9.35million) of the $65million (€55million) payout from their lawsuit against Zuckerberg to invest in Bitcoin at a price of $120 (€100). Today, that stake is said to be worth over $1 billion.

It’s worth noting that Bitcoin wealth is concentrated in a few hands: around 40% of Bitcoins in existence are owned by just 1,000 people, known as the ‘whales’ because of their huge investments.

Are these whales all legitimate? I heard it’s a conduit for criminals

In its early days, the currency was certainly used liberally by fraudsters, drug dealers and their ilk – as well as people living in pariah states like North Korea.

Because owners are able to hide their identities – and the currency is entirely untraceable by conventional means – it was a magnet for ‘dirty money’.

To be fair, a number of mainstream banks have been fined millions for money laundering and dealing with rogue regimes too.

You still haven’t told me whether or not I should buy some...

Hermann Hauser, one of the UK’s foremost tech entrepreneurs, has this to say: ‘I would encourage people to approach Bitcoin exactly the same way as they would approach the Lottery. This is as good a roulette wheel as we’ve had in a while.’ In other words, if you want a flutter with money you can afford to lose, then why not? Otherwise, the simple answer is: No.

Hold on. Couldn’t other eggheads invent virtual currencies too?

Of course – and they already have. Bitcoin has spawned many rivals, such as Ethereum, probably the second best-known. In fact, cryptocurrency aficionados already say ‘Bitcoin is so over’.