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Bitcoin – the absolute introduction

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Bitcoin – the absolute introduction

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Like technology, the face of currency has changed considerably over the years; from animals used in barter trade, to coins made from precious metals. Today we have notes and coins accepted as legal tender. What all these have in common is that they have or had tangible value, were backed by items of tangible value, or had government backing. However, a new intangible currency called Bitcoin is fast making its way as a popular means of exchange. Here’s a quick intro on Bitcoin.

What is it?

It is a digital currency that allows transactions between users to be made directly without any intermediaries (e.g. banks). The system was started in 2009 by someone using the alias Satoshi Nakamoto.

Since there are no middle men, people can transact without paying any fees and can also make purchases anonymously. The currency is completely unregulated and does not fall under the jurisdiction of any government. 

How does it work?

To start earning or using Bitcoin, you need to get a digital wallet to store your Bitcoin. This is a software programme you install on your computer that acts like a virtual bank account. This digital wallet is what you will use to transact with other users.

Each transaction made between users is recorded in a central list called the blockchain. The blockchain is constantly shared to all Bitcoin users and makes sure transactions are valid and not duplicated.

How can I earn Bitcoin?

You can earn Bitcoin in many ways. The most popular being Bitcoin mining which is how Bitcoins are created. You can also trade goods and services for Bitcoin. Bitcoin exchanges have also been created where you can exchange cash based currency (e.g. Rands) for Bitcoin. We go into more detail on how you can get Bitcoin in a later post.

So you may have a couple of questions? Where does Bitcoin get its value? Is it safe? Follow our series this week for answers to these questions and more.

Now read: Want to understand Bitcoin? Start with the value of money

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Christopher Chanakira

Chris holds an Honours degree in Actuarial Science from the University of Pretoria. He works as an Actuarial Analyst in a Group Life Insurance role at a JSE Top 40 financial services company. Chris loves playing drums and is currently learning how to play the bass guitar.

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