BITCOINS

WHAT ACTUALLY IS BITCOIN?
Bitcoin is a cryptocurrency, the first and still the biggest. At its core, it’s a new form of digital asset, created through a canny combination of encryption .
If you own a bitcoin, what you actually control is a secret digital key you can use to prove to anyone on the network that a certain amount of bitcoin is yours.
If you spend that bitcoin, you tell the entire network that you have transferred ownership of it and use the same key to prove that you are really you. In that respect, your key is similar to a password that allows you access to your money, except with no possibility of resetting your key if you lose it. Anyone else who manages to discover your key would gain total, irreversible control over your cash. The history of all the transactions made is a lasting record of who owns which bitcoin: that record is called the “blockchain”.
What are its advantages over money created by central banks?
Bitcoin advocates will point to a number of possible advantages, from the ability to use the blockchain to track things other than simple money to the built-in support for “smart contracts”, which execute automatically when certain conditions are met.
But the biggest advantage, and the only one everybody agrees on, is that bitcoin is decentralised and so extremely resistant to censorship.
Although it’s possible to observe a bitcoin payment in process, it’s not practicably possible to stop it. That makes it radically different from conventional banking, where banks can, and do, intervene to freeze accounts, vet payments for money laundering or enforce regulations. That has made it a haven for activities from cybercrime and drug trading to enabling international payments to closed economies and supporting radically off-grid living.
SO WILL I NEED TO START TAKING BITCOIN TO TESCO FOR MY WEEKLY SHOP?
Unlikely. Bitcoin has one major hurdle to being used at scale for physical transactions: payments are only confirmed once every 10 minutes (and that’s when everything’s working well; in practice, it can take days for confirmation to occur). This means theoretically that it’s possible to spend a bitcoin, then walk next door and spend exactly the same bitcoin at a second establishment. Only one of those transactions will ultimately be confirmed, leaving the other place out of pocket.
More generally, bitcoin has limited advantages for payments between big companies and normal consumers. It’s no easier or quicker than any other mobile payment, it introduces considerable volatility to your daily holdings (or a sizable hedging cost to guard against swings in the value of the currency) and remains a pain to integrate with the conventional banking system.
That hasn’t stopped some large companies experimenting. Microsoft accepts bitcoin for payments on its online store and PayPal offers integration for merchants to offer the cryptocurrency as a payment option.
IS IT REALLY THE NEW GOLD?
Probably not, but the comparison isn’t completely spurious. One of the interesting quirks of bitcoin is that there will never be more than 21m of them in existence. That figure is written into the currency at its source code and is a function of how the network rewards those people who provide the computing power (called “miners” – because of that gold analogy) that keeps it ticking over.
Every 10 minutes, one of the miners is rewarded with a sum of bitcoin. That reward doesn’t come from anyone: it is created out of thin air and added to the bitcoin wallet of the miner. Initially, that reward was 50 bitcoin, but it gets halved every four years, until, midway through the 22nd century, the last bitcoin ever will be produced.
For a certain type of economist, that hard limit is an extremely good thing. If you believe that the key problem with the financial system over the past 100 years has been that central banks print money, creating inflation in the process, then bitcoin provides an alternative ecosystem where inflation is capped forever.
DOES IT REALLY CREATE MORE CARBON DIOXIDE THAN ECUADOR?
Yup. And then some. Citibank estimates that the bitcoin network will eventually consume roughly the same amount of electricity as Japan. The problem is that the mining process is incredibly wasteful – and deliberately so. Those miners are all competing to be the first to solve an arbitrarily difficult computing problem, one that takes enormous amounts of processor cycles to do and still comes down mostly to luck. The computer that does solve it first, every 10 minutes, gets a sizable reward – currently in the region of £65,000 in bitcoin – but every computer, not just the winner, has had to spend that processing time to do the maths.
The reason for the mining requirement, which is essentially asking a computer to continue rolling a dice until it rolls a few thousand sixes in a row, is that it ensures that no single person can dictate what happens on the network. The proof that the miner has solved the problem is what it uses to claim its reward, but it also becomes the seal that it uses to verify the last 10 minutes of transactions.
“I, miner number 2357398, have solved this problem, and the answer is [extremely long string of digits]. By the authority vested in me by the network, I declare that the following list of transactions to be confirmed:” and then they list every transaction that they have heard about in the last ten minutes.
From that point on, every machine on the network begins solving a new problem, set by the last miner. But, crucially, they only do so if they agree with the miner’s list of transactions. That means that even if you do win the race, it’s not enough to simply insert your own lies in the block, and declare that everyone sent you all their money, because everyone else will simply ignore you and listen to the next miner in the chain.
(The reward itself isn’t really necessary to Bitcoin, but it’s there to ensure that miners have some reason to throw their electricity at the network. In the long-run, the hope is that voluntary transaction fees for quicker confirmations will take over that role.)Because the problem is so processor-intensive and so randomly rewarded, it’s prohibitively expensive – in electricity and computing power – to attempt to fake it. But it’s also a vast use of electricity, worldwide, used to do little other than satisfy an arbitrary requirement for spending money.
IS BITCOIN THE ONLY CRYPTOCURRENCY?
Not at all, although it’s still the most valuable. After bitcoin’s creation in 2009, a number of other cryptocurrencies sought to replicate its success by taking its free, public code and tweaking it for different purposes.
Some had a very defined goal. Filecoin aims to produce a sort of decentralised Dropbox; as well as simply telling the network that you have some Filecoins, you can tell it to store some encrypted data and pay Filecoins to whoever stores it on their computer.Why would you want that? Well, it again comes back to censorship resistance. If you store something on your Dropbox that the company doesn’t like, it can just delete the data and ban you. With Filecoin, it’s impossible to tell what’s being stored, and impossible to force the network to block any given user anyway.
Others are more nebulous. Ethereum, now the second biggest name after bitcoin, is essentially a cryptocurrency for making cryptocurrencies. Users can write “smart contracts”, effectively programs that can be run on the computer of any user of the network if they’re paid enough Ether tokens.Think, for instance, of offering a small sum every time someone responds to a particular signal with today’s headlines: you’ve built a decentralised news website, then. Or you could write a small program and reward someone every time it’s run: that way, you’ve created a decentralised cloud computer.
As a category, these new cryptocurrencies are increasingly referred to as “decentralised apps”, or “dapps”, with the focus being not on the specific currency used to make the system work, but on its overall goal.It might even be best not to think of the coins that lie at their heart as “currency” at all: when the token could represent a services contract, a land registry record, or the right to five minutes of computing time, the analogy to pounds and dollars has rather broken down.
WHAT IS DRIVING THE PRICE RISE?
That’s the billion-dollar question. A few different explanations have been offered.
Some fans will say that the price rise is simply a correction to the natural rate of growth for bitcoin. Sure, they argue, the technology has had its booms and its busts, but if it is to become a worldwide digital currency, its value will definitely be higher than it is today. In that narrative, the price rise is simply a reflection of the growing acceptance of bitcoin.
Other fans point to the growth in novel cryptocurrencies. Because of bitcoin’s maturity, and its focus on finance, if you want to buy some Ether, some Filecoins or any other cryptocurrency, it’s usually easiest to buy bitcoin with your conventional currency and then trade bitcoin for the cryptocurrency of your choice. Naturally, then, booms in those currencies are leading to booms in bitcoin itself, as more and more people attempt to buy into the whole system.
Then there’s the bubble argument. There, people argue that the majority of the price rise is due simply to people buying bitcoin in the hope that they can sell it later for a profit. A classic speculative bubble, some people will make a lot of money – while others will lose everything.
we simply put that the movements of BTC has some fundamentals attached to it, like when ICO was rejected by a country that is a prime miner, to when the USA did their election in 2017, the Brexit concern to the segwits of BTC and lastly when BTC fell and shot back due to a cancelled segwit.
SO IS IT A BUBBLE?
Few would argue that there isn’t a lot of speculation in the cryptocurrency market. There are adverts on the London underground, and all over Instagram and Facebook, encouraging viewers to “invest in cryptocurrencies” and, judging by the amount of money flowing in to the ecosystem, a lot of people are taking up the offer.
At some point, those people will get flighty and try to cash out their gains. If enough do at once, the price of bitcoin will take such a tumble that it will prompt a run and we’ll see the classic crash.
But the real question is not whether this will happen, but when – and how big the crash is. Three times now, bitcoin has had boom-and-bust cycles that have seen vast amounts of value destroyed, but have still left the currency valued higher than it was before the previous boom began. (Personally, I first called bitcoin a “bubble” in print when one coin was worth $30. After the crash that followed, one coin was worth $120.) It’s not a smooth ride up, but that doesn’t mean it’s a total bubble.
WHAT IS A “HARD FORK”?
W2S3\AZQAs the bitcoin network has grown, it’s hit problems. For dull, technical reasons, the network as it was initially designed struggles to deal with the amount of traffic that flows through it these days, leaving huge delays in the amount of time it takes for a transaction to be confirmed.
In a normal, centralised, business, that wouldn’t be a problem: simply update the software and move on. But a bitcoin update requires convincing every single miner to accept the new software – otherwise, the miners who carry on running the old version are effectively running a completely different currency from those who have updated.
This is known as a “hard fork”, and for the first six years of bitcoin’s life, it was the nightmare every developer tried to avoid. But recently, divisions among the community have become so fractious that multiple hard forks have occurred, all around how to deal with this traffic slowdown.
With names like Bitcoin Classic, Bitcoin Unlimited, and Bitcoin Gold, each claims that it is the true heir to the original vision – but with each fork, the playing field becomes more crowded.
Nothing is destroyed with each fork: if you had 100 bitcoin before Bitcoin Cash split off, after the split you still had 100 bitcoin and you had 100 Bitcoin Cash. But with each fork, the playing field becomes more crowded, more confusing for newcomers, and the overall reputation for (relative) stability becomes more eroded. Another fork, SegWit2x, was due to happen in late November, but its backers decided at the last minute it didn’t have enough support and called it off.
WHAT’S THE BANKING ESTABLISHMENT’S VIEW OF BITCOIN?
It varies greatly. Some, such as JP Morgan Chase head, Jamie Dimon, are extremely dismissive of the whole thing, arguing that the very properties of bitcoin that make it so appealing as a form of digital gold are why it’s doomed to remain a niche prospect. For Dimon and co, the volatility of its exchange rate, lack of any economic oversight to control monetary policy and absence of support from major nation states mean bitcoin can’t ever truly replace pounds and dollars and is therefore a failure.
Few disagree with that conclusion, but some bankers point to other advantages of the technology. The blockchain concept, they say, might be useful in conventional banking too. Forget bitcoin itself and focus instead on the value of a “distributed ledger”. What if all the major banks replaced their normal book-keeping with one shared, but still closed, database? Might that help cut down on fraud and ensure a more level playing field?
And then, of course, there are the advantages of bitcoin that conventional banking can’t hope to compete with - and doesn’t want to. Can a shadow currency exist purely on the back of drug dealing and cybercrime? Quite possibly: both are big businesses, and neither shows any sign of going away.
If you’ve made the decision to buy some bitcoins, you may now be asking yourself how to store the digital currency. In name, the answer is what you might expect from experiences with fiat currency. But the details require a little explanation.
The private keys that are necessary for accessing a Bitcoin address are stored on a “bitcoin wallet.” In general, wallets grant you access to your public Bitcoin address and allow you to sign off on transactions, but they differ based on how you choose to access them. Factors to consider when choosing the best bitcoin wallet for you include security, anonymity and control.
DESKTOP WALLETS
allow users to create an address for sending and receiving bitcoins and provide a place to store the private key for doing so. This can be done by downloading software to an individual computer. If you have already installed the original bitcoin client (Bitcoin Core), then you are running a wallet, but may not even know it. In addition to relaying transactions on the network, this software also enables you to create a bitcoin address for sending and receiving the virtual currency, and to store the private key for it.
There are other desktop wallets too, all with different features. MultiBit runs on Windows, Mac OSX, and Linux. Hive is an OS X-based wallet with some unique features, including an app store that connects directly to bitcoin services.
Some desktop wallets are tailored for enhanced security: Armory falls into this category.
Others focus on anonymity: DarkWallet – uses a lightweight browser plug-in to provide services including coin ‘mixing’ in which users’ coins are exchanged for others’, to prevent people tracking them.

MOBILE WALLETS
accessed through apps, allow users to transact on the go. While “full Bitcoin” clients download the entire Bitcoin blockchain, mobile wallets are designed to utilize only a small fraction of the blockchain and rely on other nodes within that network to access the remaining necessary information.
Desktop-based wallets are all very well, but they aren't very useful if you are out on the street, trying to pay for something in a physical store. This is where a mobile wallet comes in handy. Running as an app on your smartphone, the wallet can store the private keys for your bitcoin addresses, and enable you to pay for things directly with your phone.
In some cases, a bitcoin wallet will even take advantage of a smartphone’s near-field communication (NFC) feature, enabling you to tap the phone against a reader and pay with bitcoins without having to enter any information at all.
One common feature of mobile wallets is that they are not full bitcoin clients. A full bitcoin client has to download the entire bitcoin blockchain, which is always growing and is multiple gigabytes in size. That could get you into a heap of trouble with your mobile service provider, who will be only too happy to send you a hefty bill for downloading it over a cellular link. Many phones wouldn't be able to hold the blockchain in their memory, in any case.
Instead, these mobile clients are often designed with simplified payment verification (SPV) in mind. They download a very small subset of the blockchain, and rely on other, trusted nodes in the bitcoin network to ensure that they have the right information.
Examples of mobile wallets include the Android-based Bitcoin wallet, Mycelium, Xapo and Block chain (which keeps your bitcoin keys encrypted on your phone, and backed up on a web-based server).
Apple is notoriously paranoid about bitcoin wallets. Coinbase had its mobile wallet app pulled from the app store altogether in November 2013, and this was followed in February 2014 by removal of Blockchain’s iOS app. However, in July 2014, bitcoin wallet apps began to reappear on the iOS store, and now all of the major bitcoin wallet providers have released new editions of their previous apps

The Aegis Bitcoin Wallet even supports android smartwatches
There are also other types of wallets that can be used on a mobile, such as the browser-based wallet Coin Punk is developing. Another unusual wallet is the Aegis Bitcoin Wallet, which supports Android smartwatches.

CUSTODIAL WALLETS
which store Bitcoin keys on the internet through a third-party website, also allow users to access their bitcoins from almost anywhere. There is, however, the potential danger associated with entrusting someone else with that information.
BITCOIN PAPER WALLET
services provide users with a Bitcoin address and two QR codes, one that links to that address and another that provides the private key necessary for transferring bitcoins stored on it. The thinking is that this eliminates the digital storage of the key and, therefore, the potential of a cyber attack.
One of the most popular and cheapest options for keeping your bitcoins safe is something called a paper wallet. There are several sites offering paper bitcoin wallet services. They will generate a bitcoin address for you and create an image containing two QR codes: one is the public address that you can use to receive bitcoins; the other is the private key, which you can use to spend bitcoins stored at that address.
A bitcoin paper wallet
The benefit of a paper wallet that is made correctly is that the private keys are not stored digitally anywhere, and are therefore not subject to standard cyber-attacks or hardware failures.
Ultimately, the choice of bitcoin wallet will come down to an individual user’s preferences. Whatever they decide, it will be a crucial aspect of their experience with the digital currency.
ONLINE WALLETS
Web-based wallets store your private keys online, on a computer controlled by someone else and connected to the Internet. Several such online services are available, and some of them link to mobile and desktop wallets, replicating your addresses between different devices that you own.
One advantage of web-based wallets is that you can access them from anywhere, regardless of which device you are using. However, they also have one major disadvantage: unless implemented correctly, they can put the organisation running the website in charge of your private keys – essentially taking your bitcoins out of your control. That’s a scary thought, especially if you begin to accrue lots of bitcoins.
Coinbase, an integrated wallet/bitcoin exchange operates its online wallet worldwide. Users in the US and Europe can buy bitcoin through its exchange services.
Circle offers users worldwide the chance to store, send, receive and buy bitcoins. Currently only US citizens are able to link bank accounts to deposit funds, but credit and debit cards are also an option for users in other countries.
Block chain also hosts a popular web-based wallet, and Strong coin offers what it calls a hybrid wallet, which lets you encrypt your private address keys before sending them to its servers – encryption is carried out in the browser.
Xapo aims to provide the convenience of an simple bitcoin wallet with the added security of a cold-storage vault.
HARDWARE WALLETS
Hardware wallets are currently very limited in number. These are dedicated devices that can hold private keys electronically and facilitate payments.
Trezor hardware wallet

The Trezor hardware wallet is targeted at bitcoiners who wish to maintain a substantial stash of coins, but do not want to rely on third-party bitcoin storage services or impractical forms of cold storage.
Ledger USB wallet

The compact Ledger USB Bitcoin Wallet uses smartcard security and is available for a reasonable price.

. The KeepKey wallet
software was originally a fork of Trezor's code.

Mycelium, Cryptolabs and Bit Stash currently have a hardware wallets in development, but, as of September 2015 none of these had delivered finished products. Announced on February 4th 2014, is the Nymi sports wristband from Boinym, which can act as a bitcoin wallet and uses your heart rhythm as a security key.
ARE BITCOIN WALLETS SAFE?
It depends how you manage them. The private keys stored in your wallet are the only way to access the transaction data stored in a bitcoin address. If you lose them, you lose your bitcoins. So, they are only safe in so far as no one else can access them, and they don’t get lost.
ARE BITCOIN WALLETS ANONYMOUS?
On the one hand, bitcoin is entirely anonymous. On the other, it is completely transparent and trackable. Due to this fact, bitcoin is often cited as being pseudonymous.
This fact resulted in some companies emerging with the goal of controversially tracking suspect transactions to 'police' the blockchain. To counter this, ideas were developed in the bitcoin community to take anonymity further, such as merge avoidance, stealth addresses, and coin mixing.
The alpha version of Dark Wallet – a crowdfunded bitcoin wallet – went live in May 2014. Created by Amir Taaki and Cody Wilson, Dark Wallet was designed to provide new tools for financial privacy, including in-built coin mixing and stealth wallet addresses. At the time of writing, the developers are urging users to use the testnet with 'play money' to iron out bugs before risking significant amounts of bitcoin.
Wallets and services like Dark Wallet ultimately mean that using bitcoin can be as anonymous as you want it to be.

HOW CAN I SECURE MY WALLET?
There are several ways to make your bitcoin wallet more secure:
ENCRYPT IT
One way to protect your wallet from prying eyes is to encrypt it with a strong password. This makes it difficult to access your wallet, but not impossible. If your computer is compromised by malware, thieves could log your keystrokes to find your password.
BACK IT UP
If you have your private keys stored in one wallet, but you mislay that wallet or it gets corrupted, you will lose your keys. Backing up your wallet makes a copy of your private keys, but it's important to back up your whole wallet. Some addresses are used to store change from transactions, and may not be shown to you by default. Back up the whole wallet in several different places, and keep them safe from prying eyes.

USE MULTISIG
The number of services which support multi-signature transactions is increasing. Multi-signature addresses allow multiple parties to partially seed an address with a public key. When someone wants to spend some of the bitcoins, they need some of these people to sign their transaction in addition to themselves. The required number of signatures is agreed at the start when people create the address.
Since multiple signatures are needed before funds can be spent, the additional signatures could come from, say, a business partner, your significant other, or even from a second device which you own, to add a second factor to spending your coins.
TAKE IT OFFLINE
If you are too nervous to store your bitcoin keys digitally, for fear that they may be stolen by hackers, there is another option: ‘cold storage’. Cold storage wallets store private bitcoin keys offline, so that they can’t be stolen by someone else on the Internet.
It’s a good idea to use cold storage for the bulk of your bitcoin fortune, and transfer just a little to separate bitcoin addresses in a ‘hot’ wallet with an Internet connection, making it easy to spend. That way, even if your mobile phone is lost, or the hot wallet on your notebook PC is erased during a hard drive crash, only a small amount of bitcoin cash is at risk.
Many software bitcoin wallets feature a cold storage option. Or, you could go completely analogue, and simply use paper wallets for offline storage.