A question we’ve heard a few times recently is “What’s Bitcoin? I’m confused.”
Sadly, we have to admit that we were also confused.
We resolved however to do some research to find out what the hoopla is about.
So, here it is, an “intro to Bitcoin”, I hope it helps if like us, you’ve been a bit (!) in the dark until now.
Bitcoin has been around since 2009 and is the most well-known of the new, so-called crypto-currencies.
Indeed it was the first of these new, digital currencies to come into existence.
Following a slow start, you can now get your hands on the increasingly popular Bitcoins in all sorts of ways.
Indeed, budding entrepreneurs can even ‘mine’ (earn) them using a powerful computer to help support the Blockchain architecture that underlies Bitcoin. (More on this Blockchain technology later by the way).
For most of us though ‘mining’ and the like is unrealistic and it’s a case of buying Bitcoins which involves:
1) Getting a Bitcoin wallet from a provider such as Blockchain; and then;
2) Using a Bitcoin broker such as Quickbitcoin to buy bitcoins for cash.
Buying Bitcoins is therefore very much like buying a foreign currency from, say, Thomas Cook and indeed a foreign currency is not a bad way of thinking about Bitcoin albeit one that is ‘a citizen of the world’ as opposed to of a particular country.
Ok, but what’s all the fuss about? Why might you want to swap your hard earned pounds into Bitcoins?
Well at the start of this year, you could buy a Bitcoin for around £1,000.
Today (29 Nov 2017) you’d have to pay around £6,000.
However, as you will have heard “the value of an investment can go up as well as down and prior performance is not necessarily a guide to future performance…”. This cautionary advice has perhaps never been so pertinent as in relation to Bitcoin the price of which has been hugely volatile..
Yes, it’s true that today (29 Nov 2017) you’d pay around £6,000 for a Bitcoin. However, take a look at this chart on coingecko to see how it got there and how much the price of a Bitcoin has historically jumped around. Quite the bumpy ride…
To tell you the truth, I’m not surprised by this. After all what we’re talking about here is a much-hyped, independent new currency without any form of government backing or control. Indeed Jamie Dimon of J P Morgan fame likens the current situation to the speculative bubble that was Tulip Mania of the 1700’s.
We’ll leave you to make up your own minds.
For us though, it’s very much a case of caveat emptor or buyer beware when it comes to Bitcoin for now.
Saying this, what is grabbing us is the Blockchain technology that underlies the new currency.
Blockchain is a new technology that provides a solution to the security/integrity issues inherent in distributed peer-to-peer computer networks. (For simplicity think a network of individual computers each of whose resources are directly available to each other).
In so doing it has opened wide the door that was previously shut to using distributed peer-to-peer networks to provide alternative solutions for a whole range of problems where a centralised solution is currently employed that involves multiple middlemen.
It’s a complex area but what we’re talking about here is a technology that offers a way of replacing middlemen such as banks, stock exchanges and others. Genuine game changing stuff. Hence the hype about Bitcoin and why the Big 4 accounting firms are no ploughing money into applications for the new technology.
Not sure about Bitcoin but we’re going to be hearing more about Blockchain, we’re sure.