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Q&A: What is bitcoin?
TOKYO, March 13, 2019 (BSS/AFP) – Bitcoin has carved out a name for itself
as the world’s most popular cryptocurrency since arriving on the scene more
than ten years ago.
However, the workings of the premier digital cash system remain something
of a mystery to the general public.
– What is bitcoin? –
Bitcoin is a decentralised virtual currency created from computer code in
the wake of the 2008 global financial crisis.
Unlike a traditional currency such as the dollar, euro or yen, bitcoin has
no central bank and is not backed by any government.
Instead, the unit is controlled and regulated by its community of users,
who argue that this makes it more efficient than traditional currencies.
There are some 17.5 million bitcoins in circulation, while the total
number can never exceed 21 million.
– How does it work? –
Bitcoin uses so-called peer-to-peer blockchain technology to create and
trade instantly, across the globe.
A blockchain is an extremely secure ledger for recording transactions that
is open to all who use it.
Transactions happen when heavily encrypted codes are passed across a
computer network.
The network as a whole monitors and verifies the transaction in a process
that is intended to ensure no single bitcoin can be spent in more than one
place simultaneously.
And, just like conventional currencies, bitcoins can be exchanged for
goods and services — provided the other party is willing to accept them.
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– How to buy bitcoin? –
Like other virtual units, bitcoin can be produced, or “mined”, by banks of
computers solving complex algorithms.
However, large-scale currency mining can be very expensive because it
requires cutting-edge technology and vast amounts of electricity.
Bitcoin can also be purchased with traditional currencies over online
trading platforms.
Users hold the cryptocurrency in a protected virtual wallet, and can then
“send” it to one another using the blockchain technology.
But serious security questions linger after hackers managed to steal
bitcoin from some online “wallets” in countries including Japan and South
Korea.
Bitcoin and its cryptocurrency peers are meanwhile known to be used by
criminals for transactions and money-laundering, posing a headache for
regulators.
– How much is one bitcoin worth? –
At its birth, bitcoin was priced at virtually zero, before experiencing
astonishing growth in 2017 to peak at a record $19,500 by the end of that
year.
However, investors feared a speculative bubble and it has since crashed
down to stand at about $3,900 per unit following months of volatile trading.
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