Bitcoin is thought of as a digital currency because it exists only virtually, without any physical coins or notes.
There are three different ways to acquire Bitcoin: First, you can buy the cryptocurrency with legal tender at online exchanges such as Coinbase or Bitfinance.
It contains a public key as well as a private key that allows only the owner of the wallet to send or receive cryptocurrency.
After Mr. X has received the public wallet address of Ms. Y, he signs off the transaction with his private key to verify that he is indeed the sender of the digital currency.
After that, the Bitcoin gets sent to Ms. Y’s public address, where she can now unlock the transfer with her private key.
The Bitcoin transaction between Mr. X and Ms. Y is finally included in a vast public ledger, the blockchain, where all confirmed transactions exist as blocks.
It’s cheap electricity from coal gives it a competitive edge over rival miners, mainly in the US, Russia, Iran and Malaysia.
Due to the massive computing power needed for crypto mining and processing, the Bitcoin network consumes vast amounts of energy — about 120 terrawatt hours of power per year.
Designed to be as rare as gold, Bitcoin was created to have a maximum of 21 million “coins.” Initially worth just a fraction of a cent, by February 2011 the currency had gained parity with the US dollar, then it really took off.
But despite claiming to be a 30-something Japanese national, it is generally thought that several computer science experts created the technology behind the digital coin.
Instead of being printed like dollars and euros, each Bitcoin is created on a global network of computers and verified by the system rather than a bank.
To ensure that not too much Bitcoin comes into circulation, a process called mining was created where blocks of transactions could only be processed once a difficult math problem was solved by geeks.
Due to its anonymous nature, Bitcoin’s success is likely being fueled by organized crime, including money laundering and the purchase of illegal goods.
Bitcoin is the largest of all the cryptocurrencies and its incredible rise has spawned many imitators.
Worth close to $1,000 in January, some twelve months later it had scaled to an all-time high of $19,784.
Just before Christmas 2017, Bitcoin saw a dramatic rally, topping out at nearly $20,000 before losing a third of its value in just five days.
“In a country where the population doesn’t have access to the internet, it’s a joke to talk about digital money like cryptocurrency,” one resident told DW.
As a matter of fact, Bitcoin’s value has seen wild swings, soaring by 150% last year to reach a record $68,991 before falling sharply in recent months.
Frankenberg said that poorer countries in particular are good candidates for the parallel introduction of Bitcoin into the financial system.
It allows billions of people to store their money, and therefore their work and life time, permanently for the future.
“That can’t be the primary motivation for Bitcoin,” he said.
El Salvador last year became the first country in the world to bring bitcoin under its umbrella of legal currencies.