An Idiot's Guide To Bitcoin

An Idiot's Guide To Bitcoin
December 2, 2017
Bitcoin has taken the financial world by storm, but is the cryptocurrency a way to make easy money or a bubble waiting to burst? © Getty Images


IT'S 2010 and you walk into your local Post Office, slap £75 on the counter and ask for your money back in dollars.


The cashier hands you back $121.50 for your hard-earned pounds - $22 more than you'd get back for the same transaction today.


On that same day, if you had instead spent your £75 on a mysterious virtual currency named Bitcoin, you'd now be sitting on a mound of money worth £9.5MILLION.


Indeed, since those early days, the online money has multiplied in value - give or take - 125,000 times over.


Such is the investment value of Bitcoin, that Julian Assange claims it funded both him and Wikileaks when he was forced to invest in the currency as the result of US sanctions.


And financial experts reckon its value could skyrocket even further in the next few years.


So just how do you invest in the shadowy world of Bitcoin?


What is Bitcoin and how did it start?


Bitcoin became the world's first entirely virtual currency when it was introduced in January 2009.


Users cannot carry coins or notes and its value appears only as a number on a screen.


It was created by a shadowy online account which went by the name Satoshi Nakamoto.


New currency is created via a complex online process called mining which uses supercomputers to create new Bitcoins using computer coding.


In its early days, Bitcoin proved relatively worthless - with one notorious example seeing an early pioneer paying for a pizza using two bitcoins.

The currency proved useful to Wikileaks founder Julian Assange, who claims it helped him bankroll his whistleblowing site. ©Getty Images


Today that pizza would be worth the equivalent today of £15,000.


Indeed, within a few years the currency already had its own 'buried treasure' story.


Brit James Howells threw out a computer containing 7,500 Bitcoins on its hard drive - the equivalent of £56MILLION.


As only the computer the currency was bought on can be used to redeem it, the money was all but lost to Welshman Howells.


The broken Dell laptop is now believed to be buried below a mound of rubbish at a tip in Newport, Wales.


How can Bitcoin be bought?


The most common way to buy the currency is to download a broker app such as Coinbase and Blockchain.


These allow users to use a credit or debit cards to exchange pounds for Bitcoin.


Users do not have to buy whole Bitcoins and can purchase a small percentage that matches the value of their cash investment.


Once a request has been made, online 'miners' will decide whether to approve the transaction.


If approved, the money will be taken from a user's account in exchange for Bitcoin.


When selling, users can use the same app to sell their Bitcoin in return for its cash value.

The value of Bitcoin has increased 125,000-fold in just seven years


How much could Bitcoin be worth?


Bitcoin bought at the beginning of 2017 is now worth ten times what it was in January.


Many commentators believe the craze is a bubble ready to burst.


But in reality, nobody knows with any great degree of certainty what will happen to the cryptocurrency in the long term.


Wall Street commentator Ronnie Moas reckons it should increase by 40 per cent by mid-2018.


By contrast, economist Kenneth Rogoff predicted "the price of bitcoin will collapse" in a piece for the Guardian.

Related articles

VRrOOm Wechat