Bitcoins have been in the news a lot recently but what are they and how are they linked to the world of IT?
What are Bitcoins?
Bitcoins are a cryptocurrency (lines of computer code that hold monetary value) and a worldwide payment system. This digital currency works peer-to-peer with transactions taking place between two people rather than using a bank. This is a virtual currency which you will never be able to hold. It is looked after “miners” or millions of computers.
This public currency is popular because it is not regulated by any government and according to Wikipedia, as of February 2015, over 100,000 merchants accept bitcoin as a form of currency.
Bitcoins first appeared in 2009 supposedly invented by “Satoshi Nakamoto” but since cryptocurrency is designed for maximum anonymity then we will never really know his real identity.
Why Use Bitcoins?
Bitcoins can be stored on your computer hardware (offline) – cold storage ensures that there is minimum risk of it being taken by others. If you store bitcoin online, it is called hot storage and there is a high risk of it being stolen.
Once you own bitcoins, they behave like gold – you can use them to purchase goods or put them in cold storage hoping their value increases. They are also forgery resistant so there is very little risk of you being stuck with a dud.
Why Bitcoins Are Used by Criminals
Hackers were using bitcoin as their currency of choice during the Wannacry ransomware attack which brought down parts of the NHS in May 2017. According to the Guardian, it is estimated that over £100,000 was paid in bitcoin by victims. Hostages were asked to pay between $300 and $600 in ransom in order for their data to be released by the cyber attackers.
Criminal traders can also buy bitcoins and move money away from the eyes of law enforcement. In fact between 2011 and 2013, the underworld purchased millions of dollars’ worth of bitcoins and the currency value rocketed. Since Bitcoin accounts can’t be frozen or investigated by the tax man, it is very difficult to police.
Bitcoins were the first digital currency but many others have been created since. Let’s take a look at the alternatives:
For a more detailed look, do read this Investopedia article.
Currently North London IT Support just accept old-fashioned Sterling currency but if bitcoins and other cryptocurrency are staying then we may look into this in future as a method of payment.