Last year Bitcoin took the world by storm when its market value soared to almost US$20,000. But what exactly is Bitcoin? Mahurangi Matters spoke with Andrew Butler, administrator for the largest cryptocurrency Facebook page in the country, to find out.
Where did it start?
Bitcoin was introduced in 2009 by an unknown person or group under the name of Satoshi Nakamoto. The idea behind Bitcoin is to have a currency that can be transacted with no central authority involved.
What is Bitcoin?
Bitcoin is a digital currency. No physical coins exist. It is known as a cryptocurrency because it uses cryptography for verification. Because of the mathematical process required to transact Bitcoin it is considered almost impossible to hack or corrupt. One Bitcoin has a current market value of around $15,000.
Where can I obtain Bitcoin?
Bitcoin can be obtained in a number of ways, but initially it must be mined. Mining essentially requires computer processing power to solve mathematical problems that reward the correct answer with currency. The currency is immune to inflation because there are a maximum of 21,000,000 coins that can be mined, with 16,000,000 having been mined already. The more coins that are mined, the more difficult mining becomes. In the currency’s early days, home computer systems were able to mine. Now people require warehouses full of processors to do so. Bitcoin can also be bought with New Zealand dollars, either through a transactional agreement between two parties or through an exchange such as Cryptopia. Cryptopia holds Bitcoin and will trade it for other currencies.
What can I use Bitcoin for?
A growing number of New Zealand businesses are accepting Bitcoin as a method of payment. There are a number of platforms that facilitate Bitcoin payments such as Bitpay, essentially the Bitcoin version of Paypal. Bitcoin is also the standard currency for purchasing other cryptocurrencies.
The future of cryptocurrencies
Aside from being an administrator of New Zealand CryptoCurrency News on Facebook, Andrew Butler is an investor in Bitcoin himself.
He says although the currency has come under critical scrutiny recently, he believes the market has found stability and confidence in it will grow.
“For many years, it’s been a transactional currency, but I think just recently its value is seen more as a holding currency for the long term, like investing in gold,” he says.
Part of his belief in cryptocurrencies long term is their applications beyond financial transactions.
“Because the blockchain system and cryptography make them so secure, people are looking at how these coins or tokens can be used to do things like run elections, because the system is corruption proof.”
Andrew says most people investing in Bitcoin long term are hoping that it will become an international standard for currency.
“I think the core group of people investing in these currencies are young buyers who are disenfranchised with central authority due to corruption and costs.”