2. Bitcoin has almost become a household name with ever
increasing coverage in the media, and fair to say its
notoriety continues to increase. So what's all the fuss
about? Bitcoin appeared around 2009 as a new form of
digital currency and was develop from the off as opensource by a clever chap called Satoshi Nakamoto. We are
told his true identify is 'shrouded in mystery' like he's some
kind of Marvel superhero, I suspect this simply means he's
a super nerd, but there's no question, he's certainly a
pioneer...
3. So what's it all about?
Bitcoin is a form of currency the same as any other, however
it is not under the control of any government or financial
institution. The premise is for it to be owned and managed
by its own community. Bitcoin is de-centralised and
managed by peer-to-peer members who all partake in new
transaction activity and store previous activity in what are
known as 'block chains'. This means that a full 'copy' of all
transactions are stored locally and used to verify, between
participants, new activity, thereby preventing any one
person from malforming, adding or creating fake
transactions within the block chain. This 'consensus'
approach protects the security of Bitcoin transactions.
4. Bitcoin works in not a dissimilar way to PayPal in that you
have a digital wallet with a unique address where people
can send you Bitcoins. You can simply install a wallet on
your device, or you can download the full Bitcoin wallet and
participate in the network as a node.
Bitcoin's value is very much an effect of supply and demand
with risky investors gambling on the highs. Currently a
single Bitcoin (shown as 1.0000000) is worth £573 or $935.
You can purchase Bitcoins at any of the 8 decimal places
so for example 0.0100000 would cost you £5.70 and
0.1000000 would cost you £57.00, no surprise where
Bitcoin got its name!
5. OK, where do I buy Bitcoins?
Unless you have some Bitcoins coming your way via a
payment, you will need to purchase Bitcoins in your
existing currency. Purchasing is all about trust as it is not
regulated, however that's sort of how eBay started out,
where users trusted each other to pay for and send items,
and they've done rather well for themselves...
6. The Bitcoin coal face
Bitcoin mining, as it is known, is the process of generating (and
securing) Bitcoins and a small payment in the form of units of
Bitcoins are paid for the time and effort your hardware is used
and your level of participation. This is done via a number of
methods from using your own PC's CPU or GPU (not dissimilar
to other grid based BOINC projects such as Seti @ Home) to
using ASIC miners (Application Specific Integrated Circuits),
these are designed for the singular purpose for which they are
built, which in this case is generating Bitcoins. Unless you have
significant investment to purchase powerful ASIC miners such as
those from butterflylabs.com which can run at 600GH/s (Hash's
per second) you will have to look at USB ASIC Miners such as
the popular BlockErupter which generate 336MH/s. Using the
BlockErupters you can create your own USB hub style rig
running lots of them concurrently.
7. The reality though, is that it may be too late in the game to
make any serious money from Bitcoin mining. The
complexity (Hash rate) of the Block Chain is now such that
even joining and contributing to a Mining Pool, where
miners work together and share the profits, will likely see
more spent in electricity than in any real financial return.
Also there is a maximum limit of 21 million Bitcoins and at
present it is nearing 12.4 million and as more miners join,
the quicker this limit will be reached. It is now more likely
you will make money buying Bitcoins themselves than
generating them.
8. The future of Bitcoin...
Bitcoin is an emerging technology, as such the price has been
volatile, however recently it has started to become more
stable as the community of users grows. As of this writing,
Bitcoin is seeing the number of transactions reach as high
as 100,000 per day. While banks and big business are yet
to consider whether Bitcoin is a threat or an opportunity,
there is no doubt they are beginning to sit up and take
notice of this new digital currency which continues to grow
its user base daily.
Interestingly our mysterious Satoshi, the inventor of Bitcoin is
thought to own, depending on fluctuations, $1 billion dollars
worth of Bitcoins. Don't we all wish we had an idea like
that...
