CRACKING THE CODE: WHAT IS BITCOIN, HOW DOES IT WORK?

So how does a virtual currency run, with neither banks nor borders? With a little help from maths, technology, and a community of enthusiasts

Invented in 2008 by an anonymous person or group that goes by the name Satoshi Makamoto, bitcoin is a currency that exists only as lines of code.

Users exchange regular currency to buy bitcoins, which are stored in a Wallet or digital account.

All accounts need PAN card verification in India. Most other countries ask for governmentissued photo-identification

Each bitcoin has its own unique code and is created via a process called mining.

This process is part game, part race and part lottery. Shared servers race to solve billions of calculations per second and winners - called miners - get rewarded in bitcoins.

Every time a unit of a bitcoin is

used, the same servers around the world take note, recording the transaction in a public ledger for the record, and preventing double-spending.

Only 21 million bitcoins have been created by Nakamoto; 15.2 million are in circulation and new ones are released (or mined) slowly to protect value.

One bitcoin is worth Rs 40,000 today. But you can split each bitcoin into 10 crore satoshis (each worth less than a third of a paisa today), so there’s enough to go around, save or spend.

Like regular money, bitcoins get circulated when you use them – to buy e-vouchers, spend on vacation, pay phone or cable TV bills, transfer money internationally, or just to order a pizza.

Bitcoin lets you spend your digital money securely, keeping your identity private even though the transaction itself is publicly verified.

This means you can transfer currency across the world or back home without going to a bank. The money is transferred in minutes, without middlemen, leaks or bank transfer fees, which can be as high as 30%.