Bitcoins: What Are They?

Recently, the papers were full of stories about called James Howells – an unfortunate chap from South Wales who accidentally threw away bitcoins worth an estimated £5million after throwing an old laptop hard drive into a rubbish tip. Just previous to that  particular story breaking, the value of bitcoins had shot through the roof – unlucky, James!

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What is a Bitcoin?

A bitcoin is an open source peer-to-peer payment network and digital currency. Instead of physical notes and coins, bitcoins are akin to virtual tokens. Their own complex definition is that they are a cryptographic self regulating digital currency that were developed in 2009 by Satoshi Nakamoto. As a global currency, they work on the premise that they are backed up by the laws of mathematics and are not regulated by authorities – hence the ‘cryptographic’ label they are brandished with.

How do Bitcoins Work?

As James Howells discovered, bitcoins operate similarly to privately run bank accounts; if the data is lost, so are the bitcoins owned. Payments can be made anonymously if the user so wishes and they’re made via the formation of ‘bitcoin addresses’,  which can be used only once. Getting into the nitty gritty of it,  a procedure called ‘mining’ must take place, which involves a computer solving a difficult mathematical problem and for each problem solved, one block of bitcoins is processed. Once this is done, the miner receives additional bitcoins by way of reward (thus attracting people to provide the required computer processing power. In regards to the technology of processing power, which is in a constant state of increased speed and power, the difficulty of the puzzles is regularly adjusted.

How Much are Bitcoins Worth?

The value of the bitcoin has shot up tremendously and looks as though it will continue to do so. Altering slightly every second, at time of writing this article 1 bitcoin was equivalent to £594/$975. It’s these high exchange rates that have caught the attention of the media recently, and when you consider that in 2009 when poor Jamie Howells purchased his 7,900 units of bitcoin in 2009 they were worth, altogether, about twenty quid, you can see why the press latched onto his story.

We’ve yet to invest here at 3ManFactory but we’re giving it some serious consideration. How about you? Would you invest in bitcoins? Let us know if you’ve had any success or horror stories in the comments below.

 

Article by Gem Bend

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