The digital currency Bitcoin going through the roof.
A bitcoin is now worth more than $ 11,000 (£8,200) – a staggering rise since it began the year at $1,000.
So, what exactly is Bitcoin, and that is what is behind the buying frenzy?What is Bitcoin?
There are two key features of Bitcoin: it is digital and it is used as an alternative currency.
In contrast to the notes or coins in the pocket, it is largely available online. While there are some specialists in ATMs, the issue of bitcoins, it may be best to think that they are more like the virtual tokens.
And secondly, Bitcoin is not printed by governments, or traditional banks.
That is, it is “not legal tender, you can’t pay the taxes, or use it to pay their debts,” says Dr. Garrick Hileman of the Judge Business School at the University of Cambridge.
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Bitcoins are created in a complex process called “mining”, and then monitored by a network of computers around the world.
There is a steady stream of about 3,600 new bitcoins per day, with over 16.5 million now in circulation.
However, like all currencies, which is determined by your value by how much people are willing to buy and sell.Why has it gone up so much this year?
No one is quite sure. Some say it is a classic economic bubble: frantic investors pay far more for an asset than it is worth is to miss out of fear.
You put it in the same bracket as the mania for Dutch Tulip bulbs in about the year 1630 or internet companies in the dot.com boom.
Others point to the growing prospect of Bitcoin’s transition into the financial mainstream.
“Speculation is a big part of this, but there are signs of increasing use,” says Dr. Hileman.
He says there were between three and six million people around the world active crypto use currency in April.
“Today it is probably closer to 10 to 20 million, it is a very fast-growing customers base,” he says. This corresponds to a population of the size of the Netherlands or Chile.
It also has a boost of some large financial institutions, such as the owner of the Chicago Mercantile Exchange, the first in the space, he adds.As people buy Bitcoin?
There are now thousands of different crypto-currencies, but Bitcoin is always known, nor the best. To receive the bitcoin.a user a Bitcoin address-a string of 27 to 34 letters and numbers
This acts as a type of virtual mailbox to and from which the bitcoins are sent.
There is no registration of addresses, which allows some Bitcoin users to protect their anonymity. Bitcoin wallets and addresses manage savings save.
They work like privately run bank accounts-with the proviso that, if the data is lost, so are the bitcoins owned. Increasingly, users are often asked ID to open a wallet.
The rules in support of Bitcoin say that only 21 million bitcoins can be created – and that the figure was getting closer and closer. It is unclear what will happen to the value of bitcoins, when this limit is reached.You can buy bitcoins?
The anonymity of digital currencies has attracted the people want to make illegal purchases over the internet.
However, a small but growing number of recognized companies now allow customers to purchase goods and services with Bitcoin.
They range from multi-national companies such as Microsoft and travel booking site in the case of Expedia, to small companies, the it as something of a novelty, like a sushi restaurant in Cambridge, or in an art gallery in London.
It is not the same as the well-established currencies like the US dollar, which can be used all over the world to buy a coffee or pay for a hotel room.
A 900% increase in one year for a traditional currency would have serious consequences for the consumer purchasing power and the companies that accept it.
But to buy a lot of Bitcoin owners do not take advantage of things.
“The vast majority of users – I would estimate upwards of 80% or 90% – you get into the room for investment reasons,” says Dr. Hileman.
“So you see, the term” crypto-asset “is used to describe Bitcoin more as a” crypto-currency ” these days.” What are the problems, the regulatory authorities have?
At the moment, Bitcoin is unregulated largely, says Bradley rice, an expert in the financial regulation of Ashurst in the lawyer’s office.
It has been widely used on the dark web that cannot be accessed via a standard web-browser without a workaround.
There is also concern about the volatility. The table below compares Bitcoin to the pound and the euro. All values start at 100 a comparison of the currencies more clearly.
Because of the Bitcoin is much faster growth, the chart uses a different approach to the y-axis, where the smaller the distance, the faster the increase.
China and South Korea have serious concerns. You have been banned to start each new virtual currency and were down stock markets risks to which they are traded.
The UK’s Financial Conduct Authority warned investors in September, you could lose all your money, if you want to buy digital currencies issued by companies, known as “initial coin offerings”.
But the underlying technology of Bitcoin is considered by some large financial institutions, such as bullet-proof.
“That may be why the Supervisory authorities [in Europe], the assumption is largely a” wait and see ” approach,” says Mr rice.It’s all a bubble?
There is no shortage of financial journalists or experts, who say that Bitcoin surge protection is a bubble.
“Can it be said of good reasons for the purchase of bitcoin,” an article in The Economist recently. “But the dominant reason is at the moment, that it will rise in price.”
Bitcoin has value in the space of a month – what has led them to argue some, it’s too volatile to see how a currency, and warned that a crash is inevitable
But Bitcoin has been declared “dead” a couple of times already, says Dr. Hileman.
“It’s shown some resilience and bounced back from some near-death experiences,” he says.
At the same time, many would agree that this is “very lively”, and he predicts we might see a “spectacular crash again in the not-too-distant future”.
“So hold on tight, if you are a holder of these currencies,” he summed up.