Bitcoin – what’s it all about?

What is Bitcoin?

Bitcoin, often described as a cryptocurrency or a digital currency is a type of money that is completely virtual. Introduced in 2009 it is the first decentralized digital currency which allows people to send or receive money across the internet.

It can be used to buy or sell items from people and companies that accept bitcoin as payment, but it differs in several ways from traditional currencies. The most obvious difference is that bitcoin doesn’t exist as a physical currency, there are no coins and no notes, it exists purely online. Bitcoin, unlike “real-world” currencies, also has no central bank and is not controlled by the state.

How does Bitcoin work?

Each Bitcoin is a type of computer file which is stored in a ‘digital wallet’ app on either a smartphone or a computer (the Bitcoins are actually produced by solving mathematical problems).

Individuals can send Bitcoins to another person’s digital wallet and every single transaction is recorded in a public list called the ‘blockchain’. Bitcoin transactions, however, are irreversible and after confirmation, a transaction cannot be reversed.

Bitcoin is not anonymous and is often referred to as ‘pseudonymous’. By design, Bitcoin transactions are not linked to a person or identity, however a person’s identity can still be tracked down using public address information and IPs. All Bitcoin transactions are stored publicly and permanently on the network called the blockchain.

Is it secure?

Bitcoin allows you to exchange money and transact in a different way than you normally do. It makes it possible to transfer value anywhere in a very easy way and allows you to be in control of your money.  

Every transaction is recorded publicly so it is very difficult to copy Bitcoins, make fake Bitcoins or spend ones that you do not own. Nevertheless, it is important that like in everyday life, your wallet is secured and it is necessary to adopt good practices in order to protect your money.

Bitcoin mining in Data Centres

Apart from the physical servers involved in bitcoin (or other cryptocurrency) mining, the principal expense is the cost of electricity being used to power the servers – which can be very high. As power costs in the UK are generally higher than in other countries, it has not traditionally been a big player in this area. However, as bitcoin servers become more power-efficient it is likely to be growing area of revenue for data centres.

If you would like further information regarding bitcoin, cyber security or have some concerns over the security of your data, don’t hesitate to pick up the phone and give us a call. We are always happy to help – 0161 464 6101.

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