Bitcoin: Back to Basics

3rd January 2009. The date bitcoin was first created by Satoshi Nakamoto. April 23rd 2011. The date this creator disappears from the internet claiming to have “moved on to other things” but the world did not because the rise of the cryptocurrencies continues. However I for one am lost when it comes to how they actually work so I will share my very brief mission of discovery with you.

First lesson, there are literally thousands of cryptocurrencies floating around with the telegraph reporting around 1,500 currencies in May 2018. The big name is obviously Bitcoin but this has an offshoot of bitcoin cash, there is Litecoin, dogecoin (whose name is derived from an internet meme that swept the internet) and many many more. 

Secondly, no ones controls it. The currencies work by what is called “blockchain” and this can be imagined like a giant wall of lego that is glued together. Each new transaction is a piece of lego added to the top of the wall that just keeps building up in a digital ledger. It makes hacking the technology very hard because if you are changing a transaction in the middle you would have to break apart the whole wall and replace every single transaction after.

It works like any other currency that you might buy when you are heading off on your holidays so to get into the cryptocurrency game you must find someone who has it and buy it off them. This can then be bought and sold. The whizz kid of the bitcoin empire has to be Erik Finman, the 12 year old who invested $1000 given to him by his grandmother and made $1million by the time he was 18- the youngest bitcoin millionaire.

Investing in these cryptocurrencies is quick, you can spend spend spend with no restrictions and the government cannot influence or stop any of the transactions. But obviously there is the downsides of putting all your money in these currencies. There is no way of reversing those payments once you have added your transaction lego block to the blockchain, and the big appeal for the black market. The “Silk Road” is famously known where bitcoin could be exchanged for illegal drugs and items without government monitoring. For reasons like this the UK launched its own cryptocurrency task force- but with so little government control over these currencies can it have any effect?