THE RISE OF THE BITCOIN
WHAT IS BITCOIN?
BITCOIN is a ‘cryptocurrency’ that exists only online.
Created in 2008 by computer programmer Satoshi Nakamoto, it is decentralised so unlike the pound, dollar or euro, no central bank of government is responsible for it.
Other cryptocurrencies available include Litecoin and Ethereum.
HOW DOES IT WORK?
BITCOIN is finite. Because of the computer code on which it is based, there will only ever be a maximum 21 million Bitcoins in existence.
Around 16 million ‘coins’ are in circulation.
Rather than printed like a bank note, Bitcoins are ‘mined’.
This involves a computer solving a difficult maths problem with a 64-digit solution. Individuals who solve one problem unlock one block of Bitcoin. These ‘miners’ are rewarded with Bitcoin.
HOW IS IT VALUED?
BECAUSE there are a limited number of Bitcoins it tends to behave more like gold than sterling: there is a set amount which exists and that rarity makes it expensive – how much depends on the current level of demand.
Increasing demand in China as well as growing awareness of the asset are two of the main reasons for its rapidly rising price.
In the past year the value of a Bitcoin has moved from a low of £540 to a record high of £5,997.
HOW DO I GET SOME?
INVESTORS trade Bitcoin on an exchange in a similar way to buying and selling company shares.
There are many exchanges, including Bittylicious and Coinfloor. Bitcoin can be used to buy goods and services by setting up a so-called virtual wallet, and sent and received through mobile phone apps – the smallest denomination is one hundred millionth of a Bitcoin.
According to online directory Where To Spend Bitcoins UK, there are hundreds of places where Bitcoin is accepted as payment, including the Cosmic Flower Shop in Newcastle and Beech Road Chippy in Manchester.