JOHANNESBURG - Baffled by bitcoin? Here’s what you need to know.
Are you intrigued by the promise of untold riches from bitcoin investments, but still totally clueless as to what it actually is?
Here are some things you need to know before deciding whether to plunge into the world of cryptocurrencies.
Q: What is bitcoin?
A: Bitcoin is a peer-to-peer digital cash system that can be used to make anonymous - but also totally transparent - payments without the need for assistance from financial institutions, ie banks.
Q: When was bitcoin created and by whom?
A: The digital currency began life in 2009 as the brainchild of an anonymous cryptographer known by the pseudonym "Satoshi Nakamoto".
There are many theories as to Nakamoto’s identity, but no one knows for sure.
Q: Where is bitcoin kept?
A: Bitcoin is entirely digital. In other words, there are no coins or notes. Bitcoin owners keep it in their "wallet", the equivalent of a bank account.
Q: What is blockchain?
A: Bitcoin is based on a technology known as blockchain. Blockchain saves each and every bitcoin transaction on a publicly viewable digital "ledger" that forms a long chain of information.
All transactions are saved simultaneously on every computer in the network - referred to as nodes.
Q: Where does bitcoin come from?
A: Many people either purchase bitcoin with regular currency or accept payment with it.
However, it is possible to obtain bitcoin by "mining" it, which allows you to create new units of the currency.
Mining bitcoin involves verifying other people’s transactions using specialised software.
In theory, anyone can do it on their computer. In practice, mining bitcoin requires powerful computer hardware to be truly worthwhile - the cost of running mining software could outweigh the profits.