The-Accountant-Jan-Feb-2018

COVER STORY
instantaneous completion of transactions.
Therefore, bitcoin is managed by its global
peer-to-peer/ user-to-user network of
computers not by any central authority.
What is Bitcoin?
Having seen the technological backbone
that runs Bitcoin and other cryptocurrencies,
what, then, is bitcoin. As earlier briefly
defined, bitcoin is a blockchain based
currency that enables anonymous payments
without exorbitant transaction costs and
exchange rate charges, avoids the risks
associated with credit card payments and
lets users transfer even very small amounts
of money with minimal additional costs. As
such, and based on our previous foray into
blockchain, it is a currency of the internet.
Without a connected internet network with
working nodes and powered computers,
there is no bitcoin.
It is important to note that bitcoin is
similar to fiat money in the sense that it
has no intrinsic value just like government
money like the Kenya Shilling but rather
only the value that the user attaches to
it. But unlike national currencies, which
have a central bank standing behind them
to ensure trust in the fiat currency, that
is not the case with bitcoin. Another big
difference between conventional currency
and bitcoin is that you can’t hold a Bitcoin
in your hand because it is purely digital and
not physical currency.
How can I get myself some
Bitcoin or other crypto
currency?
The starting point is to create yourself an
eWallet on an ‘exchange’. The platforms that
trade bitcoin and other crypto currencies are
called ‘exchanges’ and are online websites.
Picture this as a stock broker in the case of
trading shares. The bitcoins or other crypto
currencies that are traded will have a value
against the main currencies e.g. euro, dollar,
pounds etc which then someone acquiring
crypto currency in any country can translate
to value in local currency.
The eWallet will allow you to buy and
sell crypto currencies as well as transact
in the virtual currencies. An eWallet on a
particular exchange will let you purchase
any crypto currency of your choice and
it will store transaction details as well as
valuations of the currencies one holds. It
is important to note that an eWallet must
have two ‘sides’, a public side for receiving
bitcoin payments and a private side for you
to store or move your bitcoin. One option
is to download a bitcoin wallet software
to your computer and the second option is
to create an online wallet that resides on a
third party website.
Many cities across the world now have
Bitcoin ATMs. One may wonder, how can
I get virtual currency at a cash point that
issues physical money. The answer to that
is that instead of the ATM spewing out
notes, it will credit your bitcoin eWallet
with the transaction details and value.
Many establishments in various countries
are also accepting payment in the form of
various crypto currencies, signaling that the
time when crypto currencies were more of
whispered insider tips are long gone.
In Kenya there are several local apps
and exchanges but it is advisable to create
an eWallet on the main international
exchanges to ensure maximum value per
transaction. To get a comprehensive list of
exchanges, take a look at bitcoincharts.com.
How can I transfer bitcoin?
Once your wallet is set up, you receive key
to the public side of the wallet. This is a long
alpha neumeric string (numbers and letters)
that you can safely give out in order to
receive bitcoin payments. This is similar to
your bank account number. The key to the
private side of the wallet is a 51 character
long code that should be guarded very
securely. This is a long number to recall!
Fortunately, it also comes as a QR code that
you can safely store on your smartphone.
What can I use bitcoin for and
what is its worth?
Bitcoin is a virtual currency (to perform
transactions on the internet, primarily)
but more and more brick and mortar
establishments are accepting crypto
currencies as payments especially in the
developed world. Like any market, the
exchange rate for bitcoin responds to supply
and demand forces. At the moment the
value of bitcoin is soaring (approximately
$11,000 per bitcoin) as the number of
users and uses grows. The very first bitcoin
transaction was only 10 years ago in 2009
and at the time the coin had no fixed value.
A year later two pizzas were purchased
for 10,000 bitcoin but in 2011 a value
of one-to-one versus the United States
dollar was pegged. Since then it has swung
steadily upward and for those investing
or speculating in bitcoin, price changes of
more than 20% are not uncommon in a
single day or hour.
It is the opinion of this writer that in
terms of value we have barely even began to
scratch the surface with crypto currencies.
jmmwangi@gmail.com
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