Bitcoin…explained simply. This is Matthew. He works with online payment and his grandmother, Margaret, has just begun banking online! She’s heard of Bitcoin, but doesn’t know what it is. Matthew can explain! Everyone knows about money- we use cash or cards to buy things, either in shops or online. Bitcoin works in a similar way but is a completely digital currency: It is created and stored electronically. The banks control Margaret’s money, whereas it’s the users themselves that control Bitcoin payments. Her money can be affected by inflation but Bitcoin can’t- by controlling production they keep their value on quite a solid level… …This makes it popular in countries with economic problems… …as users can circumnavigate inflation and other issues.
However, even small events such as a bad press report can have a drastic effect on bitcoin price. So where could Margaret use bitcoins? Certain companies and online retailers now accept it as payment. However, Bitcoin is still relatively unknown by businesses, as it’s a developing network… The simple and largely anonymous nature of bitcoins has also made it attractive to criminals in the black market. From Matthew’s perspective, Bitcoin is an app on a computer or smartphone that works as an online wallet. It’s easier to make payments than with conventional debit or credit cards; just enter the recipient’s address, the amount to pay, and press send. Margaret can send and receive money instantly, anywhere in the world and at any time. Unlike credit cards there are either no or only small fees because there is no bank to go through, and no personal or sensitive data is stored. Users each have their own ‘address’ from which they can send and receive bitcoins. A collection, or ‘block’ of these transactions is then added to the ‘block chain’, Bitcoin’s equivalent of a bank’s ledger… …Users that maintain this form of accounting are rewarded with new Bitcoins; this is known as ‘mining’.
There is a fixed amount of bitcoins, but over time existing bitcoins become divided to maintain a consistent value. Now that Matthew has explained Bitcoins, Margaret doesn’t find online payment to be… all that complicated anymore. Bitcoin appears to be a real alternative form for worldwide-currency for the future..
