People are making millions of dollars from bitcoin - here’s everything you need to know

People are making millions of dollars from bitcoin - here’s everything you need to know 

One bitcoin is now worth close to $11,000 after the digital currency’s value soared more than tenfold this year. In the last three days alone bitcoin has gained more than a quarter in value.

That’s far more than most investments return in a year, causing many to ask how they can get in on the action and others to suggest it’s a dangerous bubble waiting to burst.

So what exactly is bitcoin and why is it attracting so much attention?

What is bitcoin?

Bitcoin is a digital currency created in 2009 by a mysterious figure using the alias Satoshi Nakamoto. It can be used to buy or sell items from people and companies that accept bitcoin as payment but it differs in several key ways from traditional currencies.

Most obviously, bitcoin doesn’t exist as a physical currency. There are no actual coins or notes. It exists only online. 

“Real-world” currencies like the dollar are managed by a central bank such as the US Federal Reserve or the Bank of England which manage the money supply to keep prices steady. They can print more money or withdraw some from circulation if they think it’s needed. 

Where does bitcoin come from? 

Bitcoin has no central bank and isn’t linked to or regulated by any state. The supply of the cryptocurrency is decentralised - it can only be increased by a process known as “mining”. For each bitcoin transaction, a computer owned by a bitcoin “miner” must solve a difficult mathematical problem. The miner then receives a fraction of a bitcoin as a reward. The use of problem-solving in this way is the reason bitcoin is known as a cryptocurrency.