In a Nutshell - Bitcoin and Cryptocurrencies.
Cryptocurrencies do not exist in a physical state, they are decentralised, digital currencies and are independent of banks and therefore free people from paying charges for business transactions. Once the territory of technophiles, they are increasingly being adopted by main stream businesses attracted by the speed, convenience and freedom from bank charges. Such has been the adoption of Bitcoin that you can even pay for a pizza or a taxi using Bitcoin.
Each Bitcoin is divisible into 100,000,000 units and there will only ever be 21,000,000 Bitcoins. Bitcoins are dealt with person to person, without middlemen, through computer encryptions which ensure the confidentiality of each transaction. There is no need even to give your real name when making a transaction!
The value of Bitcoin, like all currencies, is determined by how much people are willing to exchange for it. To process Britcoin transactions, a procedure called 'mining' must take place. This involves a computer solving a difficult mathematical problem with a 64 digit solution. For each problem solved, one block of Bitcoin is processed and the miner is rewarded with new Bitcoin.
To receive a Bitcoin, a user must have a Bitcoin address which acts as a virtual postbox. There is no register of these Bitcoin addresses and it is this anonymity which attracts many users. These individual addresses are in turn stored in Bitcoin wallets which are used to manage savings.
If you are interested in exploring the world of Bitcoin, there are many apps and websites which can be used to open wallets and buy bitcoins. A great starting point is bitcoin.org, a site which offers great advice and pointers to help you learn more about the virtual world of cryptocurrencies.
Author: Alan Taylor FCCA
A former pupil at Ripley St Thomas C of E High School in Lancaster, Alan joined Scott & Wilkinson directly from school in 1994 and qualified as an Accountant in 2001. Alan is the Partner with responsibility for the day-to-day...
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