What is bitcoin and why are so many people looking to buy it? | Richard Partington

SourceThe Guardian
SectorFinancial Markets
CountryMiddle east

What is bitcoin? Bitcoin is a type of digital currency that emerged after the 2008 financial crisis. It allows people to bypass banks and traditional payment methods. It has become the most prominent among thousands of so-called cryptocurrencies. It relies on “blockchain” technology, which is a shared database of transactions, with entries that must be confirmed and encrypted. The network is secured by individuals called “miners” who use high-powered computers to verify transactions, with bitcoins offered as a reward.

There are more than 18m in existence, and the mathematical system controlling the generation of new bitcoins – which is decentralised and therefore has no overarching institution such as a central bank – has a hardwired maximum of 21m coins. How do you buy and sell it? There are several currency exchanges where consumers can swap traditional “fiat” money – backed by governments – for cryptocurrencies, which must be stored using a digital wallet. Some of the biggest exchanges include Bitstamp, Coinbase and Gemini. However, finance firms have also created new investment products based on bitcoin and other cryptocurrencies, such as contracts for difference, which are used to track the value of an asset without needing to directly own it. What can you buy with it? There ...read more...