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What is Bitcoin and why should you even care?

Posted on 22 January, 2018

Words by JON CLARKE

If you listen to the news, entertain social media, or eavesdrop on conversations in your local pub, you’d be hard pressed to avoid any mention of Bitcoin lately. With everyone talking about it, we thought it was a good time to shed some light on what it is and whether you should buy into it...


So what is Bitcoin? Is it a physical thing?

Bitcoin is a cryptocurrency, created and held electronically. No one controls it. Bitcoins aren’t printed, like dollars or euros – they’re produced by people and businesses, running computers all around the world, using software that solves mathematical problems.So basically, Bitcoin can be used to buy things electronically. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally.

However, bitcoin’s most important characteristic, and the thing that makes it different to conventional money, is that it is decentralized. No single institution controls the bitcoin network. This puts some people at ease, because it means that a large bank can’t control their money.


Why can’t it just be replicated?

The very rule that makes bitcoin work is that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts (the smallest divisible amount is one hundred millionth of a bitcoin and is called a "Satoshi", after the founder of bitcoin).

There is no such thing as a "bitcoin" that can be copied. Rather, there is a list of all the transactions that have taken place on the bitcoin network and the order they have taken place. Every client has a copy of this list. Essentially, the only way to counterfeit bitcoins would be to spend them in more than one place.

 

Bitcoin crash

Investing tip #1: be prepared to lose any money you invest.

 

This is called a double-spend attack. However, because of the design of the bitcoin block chain (the list of all the transactions) and the way that list is secured by mining, this requires a tremendous amount of computer power.


Why is it so popular at the moment?

In a nutshell, it’s easy to set up, totally anonymous, super fast, and completely transparent. All of these features make using Bitcoin a refreshing change from the hundreds of hoops banks make you jump through and the transactional fees they charge.


So should I invest in Bitcoin?

Ah yes, the question most of you have been asking. While offering financial advice isn’t exactly our remit (we make amazing shoes in case you forgot), we would say just be cautious with Bitcoin. Do your research, don’t invest money that you aren’t willing to lose, and don’t put all of your eggs in one basket.

While our words might be a little ‘safe’ and on the fence, there are others that feel more strongly about it. The Guardian’s financial blogger, Mr. Money Mustache, is adamant that you should stay away from Bitcoin:

“Let’s start with the answer: no. You should not invest in BitcoinThe reason why is that it’s not an investment; just as gold, tulip bulbs, Beanie Babies, and rare baseball cards are also not investments.

When you make this kind of purchase – which you should never do – you are speculating. This is not a useful activity. You’re playing a psychological, win-lose battle against other humans with money as the sole objective. Even if you win money through dumb luck, you have lost time and energy, which means you have lost.”

Investing in cryptocurrency is as much a gamble as dabbling on the stock market. There’s only so much you can learn, but these things are ultimately volatile by their nature - so just keep this in mind.

Oh and remember: if you do make lots of money from your investment, you know where to find some bucking good shoes!

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