The way Bitcoin works, where to buy it, and why people are becoming mega rich

It consumes more electricity and produces more emissions than most countries. It’s helped people pay off their mortgages, retire thirty years early, and jet set around the world.

Bitcoin may be futuristic and even lucrative, but to an ordinary person, it can sound complex and even confusing.

Created in the wake of the 2008 financial crisis by an anonymous boffin nicknamed Satoshi Nakamoto, a single Bitcoin was worth around $0.08 USD.

Today, the price of Bitcoin now sits at around $59,970 (£43,590). It’s been adopted as the official currency of the South American country El Salvador, and it has made many people filthy, stinking rich.

So what is Bitcoin, how does cryptocurrency work, and where can you buy it?

Who is in charge of Bitcoin?

The short answer is nobody, except everybody who trades it.

Most countries in the world have a native currency that is controlled and regulated by a central bank, such as the Bank of England.

Unlike standard money, Bitcoin exists only on the Internet, has no base country, and isn’t regulated by a central bank.

Instead, it is ‘decentralised’, which means it is controlled and verified by a huge network of people who buy, sell, and trade with it.

The idea is that, one day, Bitcoin could become a global currency that could be used anywhere in the world. While we’re not quite there yet, a growing list of retailers such as eBay, Tesco, Microsoft and Etsy accept it as payment.

How is Bitcoin made?

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Bitcoins are created through ‘mining’. Powerful computers must solve complex sums with a 64-digit answer.

These sums become more difficult and require stronger computers as each new Bitcoin is created, which is why ‘mining’ Bitcoin now consumes so much electricity.

Once a problem has been solved, the ‘miner’ is given a new Bitcoin.

This is added to something called the blockchain, a public record of every Bitcoin transaction there is.

Only 21 million Bitcoin can ever be created, and we’re currently about 16 million of the way there.

People are able to make money from Bitcoin by either mining it and selling it, or by buying the crypto then selling it at a higher value later on.

How do I buy, sell, or trade with Bitcoin?

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It’s really important to remember that the value of Bitcoin is extremely volatile, and can rise and drop in value very unpredictably. While many have made money on Bitcoin, lots of people have lost thousands.

You should speak to an independent financial adviser before making any major investment decisions as you are ultimately putting your savings and capital at risk.

To use Bitcoin, you need to download and install a digital cryptocurrency ‘wallet’. This is unique to you and is where your Bitcoin will be stored, and acts sort of like a virtual bank account.

There are many different types of cryptocurrency wallets, including ones that you can store on USB sticks or on your device. However, you can also get secure digital wallets through third parties.

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If you want to buy Bitcoin, you’ll need to go to a trusted ‘crypto exchange’ such as Coinbase, Binance, or Gemini. They may charge small fees on transactions, but offer good security to protect your investments and also sell other cryptocurrencies such as Ethereum.

Just make sure to triple-check the authenticity of any site claiming to be an exchange, paying close attention to the web address you’re visiting before paying for anything. There are lots of fraudsters out there looking to scam people who want to buy Bitcoin.

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