Guide: What is Bitcoin and how can it work?

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When the world's richest people give their support for a cryptocurrency, you know it's big business.

Elon Musk told users of an online social media app that he believes the virtual currency, Bitcoin, is a good thing.

His comments led Bitcoin's value to rise significantly.

Read Also: 2021: Outlook for Bitcoin Price and Its Risks

So much so, that the single Bitcoin went from £ 3,600 in March last year to more than £ 27,000 now.

As the talk of currency has become global, the Bank of Singapore has suggested that the 12-year-old coin could replace gold as a store of value.

However, in October, Bank of England President Andrew Bailey warned of the unpredictability of Bitcoin, saying it was making it "very nervous".

With all the talk, you might be wondering - what is Bitcoin and how does it all work?

Here's everything you need to know.

What is Bitcoin?

Bitcoin, which is regularly depicted as digital money, digital currency, or computerized cash - is a sort of totally virtual cash.

It's like an electronic version of cash. You can use it to buy products and services, but many stores don't yet accept Bitcoin and some countries have banned it completely.

However, some companies have begun to buy into their increasing influence.

In October last year, for example, its online payment service, PayPal, announced that it would allow its customers to buy and sell bitcoin.

The physical bitcoins you find in the photographs are an oddity. It would be worthless without the special symbols printed inside it.

How does Bitcoin work?

Each Bitcoin is essentially a computer file that is stored in the "digital wallet" application on a smartphone or computer.

People can send Bitcoins (or part of them) to your digital wallet, and you can send bitcoins to other people.

Each exchange is recorded in a public rundown called the blockchain.

This makes it possible to track Bitcoin history to prevent people from spending coins that they do not own, making copies, or undoing transactions.

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How do people get Bitcoins?

There are three main ways in which people obtain Bitcoins.

• You can buy bitcoins with "real" money.

• You can buy and sell and let individuals pay you with Bitcoins.

• Or Bitcoin can be created using a computer.

How are new Bitcoins created?

For the Bitcoin system to work, people could do their computer transactions for everyone.

Computers are designed to calculate very difficult amounts. Occasionally they are rewarded with Bitcoin for the owner to keep.

Individuals set up ground-breaking PCs to attempt to get bitcoins.

But the sums are getting harder to prevent the creation of so many bitcoins.

If you start mining now, it might be years before you get a single Bitcoin.

You will spend more money on electricity for your computer than Bitcoin is worth.

Why are Bitcoins valuable?

There are many things other than money that we consider valuable like gold and diamonds. The Aztecs used cocoa beans Kamal!

Bitcoins are significant on the grounds that individuals will trade them for genuine merchandise and ventures, and even money.

Why do people want bitcoins?

Bitcoin isn't constrained by the public authority or banks.

People can also spend their Bitcoins anonymously. Even though all transactions are recorded, no one will know your "account number" unless you tell them.

In an online conversation with social media users in January 2021, Elon Musk, the world's richest man, said he was a huge supporter of Bitcoin.

He even went so far as to change his Twitter bio to "#bitcoin".

He has demonstrated his support for online currencies time and again in recent years and has caused major movements in their values due to his personal wealth and influence.

This particular endorsement caused Bitcoin's value to rise significantly.

Is Bitcoin safe?

Every transaction is publicly recorded, so it's very difficult to duplicate Bitcoins, fake them, or spend transactions that you don't own.

It is possible to lose your Bitcoin wallet or delete your Bitcoin and lose it forever. There has also been a theft from websites that allow you to store your Bitcoins remotely.

Summery

Bitcoins have risen and fallen in value over the years since their inception in 2009 and some people do not believe it is safe to convert your "real" money into Bitcoins.