Bitcoin recently surged to a record high of over $ 2577,50. But the currency’s workings still remain a mystery to many. Here's what you need to know.
What is bitcoin?
There are four important things to know about bitcoin and how it works.
First, bitcoin is digital. It can only be created, held and traded electronically.
Second, bitcoin is decentralised. It is not controlled by a central authority, such as a national bank. This means there is little risk that bitcoin users’ wallets will be impacted by a change in monetary policy – or that their savings will be taken away completely.
Third, bitcoin is encrypted. Each "coin" has a "private key" – a secret number known solely to the individual who created it. Only the owner of a coin’s private key is able to spend those funds, and must confirm that a transaction is legitimate via a mathematically generated signature.
Finally, bitcoin is not just a currency – it is also a payment system. Bitcoins can be created and transacted – at high speeds and low costs – within the same network. All transactions are then detailed on a huge ledger called the blockchain, which is visible to all.
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