Do you know all that you need to know about Bitcoins?

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By 2017-07-18

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By Shenali Welikala

Over the past five years, after bitcoins was introduced it has been a constant source of interest and confusion. Earlier this year when the famous wanna-cry cyber-attack came into play, bitcoins received the centre stage since the ransom ware obtained bitcoins in exchange of our private computer files. More than 5.8 million users use bitcoin as a currency in their daily transactions which leads to a doubt whether bitcoins would be the next currency to dominate the world economics! But what exactly is bitcoin and how does it work?

Bitcoin was created back in 2009 as a digital currency. The main aim of this decentralized system was, to secure payments and, storing money that did not require banks or names of people. It was announced on an email circular as a way to liberate money in a similar way to how the internet made information free. But how does it work? Bitcoin works on a public ledger called blockchain, which holds a decentralized record of all transactions that is updated and held by all users of the network.

When creating bitcoins, first the users must generate blocks on the network. Each block is created cryptographically by harnessing users' computer power and is then added to the blockchain, letting users earn by keeping the network running. A limit for how many bitcoins can be created is built into the system so the value can't be exceeded. The maximum amount is just under 21 million bitcoin. There are currently 14 million in circulation, each of which was worth £1,800 at the time of writing.

Even though bitcoin is popular among all its founders remains a mystery despite several events to unmask the person behind it, who is going by a false name of Satoshi Nakamota. Recently Craig Wright, a former Australian academic, claimed to be the bitcoin inventor. Wright wrote blog posts and gave interviews to Wired, BBC and the Economist in 2015 and 2016 saying he was behind bitcoin.

Bitcoin can be spent online and at select retailers in the UK. They include CEX stores, Dell's website, Sushi restaurants, and some pubs. A full list of online and offline businesses that accept bitcoin is available. They can also be withdrawn at a couple of dozen bitcoin ATMs, which can be found here. While others simply hold their bitcoins, hoping they will accumulate in value and prove to be a lucrative investment. Its price is notoriously volatile. Bitcoin is has a range of uses, including funding companies, investing cash and transferring money without fees. It is commonly associated with criminal activity such as drug dealing, cybercrime and money laundering, since it can be near-impossible to tie a bitcoin wallet to any one individual.

Bitcoin is safeguarded against fraud and theft through independent and decentralized set up, as well as being free from transaction fees. It has also given great returns to some investors, with the price jumping from a few dollars at the beginning of 2013 to $1,100 by November making people who invested £2,000 five years ago, millionaires. This year its dollar price rose again doubling to $2,400 at one point, but back in May it fell by $400 in a day. If you are wondering whether to invest in bitcoin, it's all up to you since it seems like a pure game of gambling.

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