Bitcoin, as Wikipedia tells me, is a peer-to-peer payment system introduced as open-source software in 2009. It’s a ‘virtual currency’ that can be used for transferring money and for buying products or services, although only if your chosen retailer accepts Bitcoin.
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So – why all the fuss? Well, unlike conventional currency, it doesn’t need a bank and it doesn’t need the support of any countries. In a way, it’s a bit like gold or any other precious metal. It doesn’t suffer from the same inflation that affects national currencies. In addition, governments can’t access it in the same way as a regular savings account. Oh, and the value of a Bitcoin has increased pretty dramatically since it was launched in 2009.
The downside is that Bitcoins aren’t widely accepted. The exchange rate can be volatile. And some people have lost money.
On a personal level, I’ve arrived late at the Bitcoin party. There’s little chance of me finding myself in the same situation as Kristoffer Koch, a Norwegian man who bought 5,000 bitcoins for 150 kroner (around £15) in 2009. He forgot about them until last year, when he discovered they were worth around half a million pounds. But that doesn’t mean there’s no point in making a little investment… or preparing for the future.
So, what do I need? I need a ‘wallet’ for my Bitcoins and I need some Bitcoins to put in it. At a basic level it’s as simple as that. So, let’s find a wallet.
There are a few ways to store Bitcoins. You can keep them in an online wallet that holds funds on your behalf. It saves you from the worry of looking after the money – the equivalent of keeping your savings in a vault rather than under the mattress – but, unlike the UK banking system, there’s nothing like as much protection if hackers target your account or the online service fails. Alternatively, you can keep them on your laptop or phone. Arguably there’s less risk from hackers, although a hard drive fault or a targeted hack could wipe out your money. Printing Bitcoins on paper as a QR code is an option as well.
Anyway, I’ve decided to keep my Bitcoins on my phone. It seems about as safe as keeping a £10 note in my trouser pocket. Yes, I could lose the £10 if I forget about it and wash the trousers… yet it feels pretty secure.
There are a few apps around for Bitcoins but I’ve chosen Hive. It seems secure and easy to use, with versions for Android and Mac OS. Installing it on my phone is as simple as finding Hive in the Google Play app store and clicking the link.
Once the app is installed, it provides you with a unique wallet address. This can be displayed as a QR code or as an alphanumeric code. It’s rather like an account number, except that it can only be used for deposits. And that’s the first part complete.
Next, I need some Bitcoins. Actually, I need a fraction of a Bitcoin. Bitcoins are currently trading at just under £400 for one Bitcoin (depending on who you ask), which is a bit steep for what could end up as a brief moment of entertainment. Therefore I head over to the amusingly-named Bittylicious, where UK customers can buy Bitcoins. I choose 0.03 BTC (Bitcoin), for which I’ll be charged £12.15. I enter my email address and the Bitcoin wallet address. Bittylicious then provides me with a UK bank account number, a sort code and a reference number to quote. I log in to my usual online banking service, transfer £12.15 and seven minutes later – yes, just seven minutes – the Hive app alerts me to a Bitcoin deposit.
There’s now 30 mBTC (millibitcoin) in my Hive wallet. Hooray. Apparently my investment is worth £11.71. Oh. Still, I’m ready to spend, either at an online Bitcoin-enabled retailer or at one of the rare real-world venues that takes Bitcoin payments.
Except I don’t want to waste my money and there’s nothing I need to buy at the moment. So my 0.03 BTC is just going to sit there for a bit, rather like last year’s Euros in my passport. I check my phone again. £11.71. Oh well. At least I’m equipped for the 21st century.