Bitcoin FAQs

I’m hearing a lot about bitcoins. What are they?

That depends who you ask. There is debate as to whether bitcoin is a currency or a payment protocol.

Wikipedia says it’s a software-based online payment system. The US Treasury calls it a decentralised virtual currency while the People’s Bank of China has decided that it’s not a currency at all but an investment target.

That’s nice and clear then. Let’s move on. Where can I get bitcoins from?

The same place as you get any money – cash machines. There are bitcoin ATMs, although not in Buxton. Yet.

What’s that? You can actually hold bitcoins in your hand? That doesn’t sound like a virtual currency.

Ah, no. Sorry.

At a bitcoin ATM, you use cash or plastic to top up your online supplies. The world’s first bitcoin ATM was installed in a coffee shop in Vancouver last year. London has three – one in Holborn, two in Shoreditch. So no surprises there. You can also buy and sell bitcoins at physical or online locations analogous to bureaux de change or share dealers.

But where do the bitcoins actually come from? Who issues them? Is there a People’s Bank of Bitcoin?

Good questions. Bitcoins are generated – or “mined” – by an online community of people who work for the system and who are also paid in bitcoin.

Paid by whom?

I don’t know. The Japanese guy who came up with the idea in the first place, I suppose.

What do these online workers actually do?

They offer computing power to solve puzzles and to record all bitcoin transactions into the bitcoin public ledger. Successful puzzle-solving – or mining – releases new bitcoins. Recording transactions earns already-existing bitcoins.

You’re telling me that bitcoins are generated by people who work to record the use of bitcoins?

Yup.

Sounds a bit solipsistic to me.

You mean up its own bum? Yup.

OK, enough with the technical stuff. What can I get with my bitcoins?

A hotel room or tickets to see the Sacramento Kings.

I’m not a basketball fan. How about a loaf of bread? Or a pint?

Ah, no. Sorry.

This all seems very confusing. Am I particularly stupid?

Not at all. This autumn, undergraduates at MIT are being given a hundred dollars in bitcoin in order to further their understanding of the concept.

So you need a degree from MIT to understand this stuff and then you can’t even use it to buy your lunch anyway. Why is anybody bothering?

There appear to be some well-defined groups of people attracted to it:

Financial speculators
Those with severe FOMO* (more politely called “early adopters”)
Conspiracy-wonks who like the idea of a currency free from any Government control
Techies who love the challenges of mining.

At least if it’s a virtual currency, you can’t lose it or get robbed, I suppose.

Hahahahahahahahahahahahahaaaa!

And, of course, it would never occur to anyone to use the system for money-laundering?

No, no. Heaven forfend.

Well, thank you very much. You’ve been most helpful.

You’re welcome. Any time.

(*Fear of missing out. Yes, it’s a thing.)