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How good are people in your job at saving into a pension? Money Morals: What should I charge a friend to rent my spare room? Should I pay off my student loan before applying for a mortgage? Bitcoins can be spent online, in a pub and now even have ATMs – but would you put money in the world’s newest currency?
Read this: Bitcoins can be spent online, in a pub and now even have ATMs – but would you put money in the world’s newest currency? The way we spend money is constantly evolving. If you have an Oyster card or use contactless payments on your phone or debit card, then you are already part of the rapidly emerging cashless society. The latest challenger to cash is the bitcoin, a virtual currency that is unregulated, separate from the banking system, and based on complex computer codes and data ‘mining’.
Bitcoin has only been around since 2008. It initially gained notoriety after stories emerged of the currency being used to buy drugs online anonymously and the currency hit the headlines earlier this year after a spike and collapse in its price, rumoured to have been triggered by wealthy Russians flocking to the currency amid fears governments were about to raid savings accounts. It has already given life to a series of exchanges, hedge funds and now an ATM. Investors are even soon to be given the chance to put money in without having to actually buy the virtual currency, with a plan to launch an exchange traded fund that tracks its value and is backed by a stash bitcoins. This week the second bitcoin conference took place in London.
So what is this all about? We explain bitcoins, with the help of some of the cryptocurrency’s biggest supporters at the bitcoin conference. A bitcoin is a virtual currency that is based on a decentralised system of finance, separated from bankers. Its value is derived from the amount of transactions and supply and demand in the market. There is no person or central bank controlling the supply of bitcoins. Bitcoins are created by computer programmers using complicated data ‘mining’ that makes blocks of the virtual currency online. Mining involves individuals undertaking difficult and time-consuming computer calculations.
The process ensures that the bitcoins it creates have some tangible value – they haven’t been magicked out of thin air. There will only be a maximum of 21million bitcoins and so far around 10million have been mined. The finite nature of bitcoins means it performs more like a commodity, such as gold. There is no central bitcoin body, but a series of peer-to-peer organisations providing exchanges, wallets and commerce tools. Bitcoin first emerged in 2008 and launched as a network in 2009.
It was created by an obscure hacker whose identity is a mystery but is known as Satoshi Nakamoto, which is thought to be a pseudonym for the person or group who created it. Peter Vessenes, chairman of the Bitcoin Foundation, a trade body for the various groups in the sector, says the currency has been a ‘coming together’ of technology enthusiasts, finance people and nerds. He explains: ‘The Libor scandal has led to questions about how real interest rates are. People want a way to be more private on the internet.