This is a crucial part to remember– this started OUTSIDE of the banking world. This wasn’t (and still isn’t) ruled by economists and traders and money men – it’s ruled by programmers and techies and software developers (which is why you need to approach this trading from a different angle right from the start). One of the big reasons Bitcoin has become SO popular is it cannot be printed like conventional money by the central banks making their own rules and devaluing their currencies by printing more and more to cover the national debt. Instead Bitcoin is created digitally by a community of people called miners. Bitcoins are mined using computing power in a distributed network, the network also handles and processes all the transactions using something we call the blockchain. This essentially makes Bitcoin its own payment network. Also anyone can become a miner, you just need a powerful computer and enough processing power and you’re away. (But this guide ISN’T about mining coins. It’s about buying the right crypto currencies and selling them at the right time). The Bitcoin protocol has been designed with some strict rules. The main rule is that only 21 million Bitcoins can ever be created by the miners. However each coin can be divided into much smaller parts with the smallest divisible amount being a hundred millionth of a Bitcoin. This is called a Satoshi (after the founder of Bitcoin). OK, so if some of that went over your head I wouldn’t blame you. Try thinking about it like this… Imagine a huge pile of gold coins in a cave under the ground. Let’s say there are 21 million - no more, no less. It’s an exact amount that can’t be changed. Now, imagine some of those gold coins being shared out to different groups of people. Those people use the coins like money - they buy stuff with them, trade them, save them, anything you’d do with normal money. The coins are basically like an old fashioned currency. Except, not all the coins are in circulation. Some are still in the cave, below ground, waiting for someone to ‘mine’ them out and use them.
Got it? Now... imagine those coins aren’t real, hold in your hand pieces of gold, but electronic coins. They’re sent back and forth via email. The ‘cave’ they’re in is an algorithm. To ‘mine’ them out, you need a computer. That is - more or less - how Bitcoin works. As I said, there’s a set amount of coins in existence. Some are in circulation. Some are yet to be ‘mined’ (you need a very powerful computer to do this, so we’re not even going to try it!). But the principles remain. In short, Bitcoin is like a gold coin that you send by email. To store it, you need a ‘wallet’ - like an online bank account, especially for crypto-currencies. I’ll show you how to get yourself set up in a second. First, let’s take a look at WHY Bitcoin suddenly exploded in 2013. Not in price, but in popularity - although the two are powerfully linked. The radical new ideas behind the Bitcoin revolution There are some key benefits of Bitcoin that you simply don’t get with other currencies out there. These are the reasons so many people started flocking to it a couple of years back... It’s easy to set up We’ve all had to set up a bank account in the past. It can be a real headache. The bank needs to see every detail of your identification, a long history of your past payments and debt, what your favourite colour is, your first teacher’s name, your most hated song, favourite pizza topping, first address… it can be endless. Sometimes even after you have jumped through the many hoops it’s often the case the bank may not even let you open an account (this has happened to me before, what a waste of time!). Bitcoin, however, is easy.