What you need to know about Bitcoin

Is Bitcoin currency? Or is it a speculative asset? This articles will give you alot of answers about Bitcoin.

There has been alot of interest about Bitcoin in Kenya over the past few days. The cryptocurrency rose to a new record price, the CBK governor wrote it off and there was a high profile court case, in Kenya, on Bitcoin.

This article was written by Tawanda Kembo, for TechZim. It has been updated. Follow him on Twitter

Unless you have been living under a rock for the past couple of years, you have probably heard about bitcoin. What makes bitcoin fascinating is that it’s the first currency which is not just free , as in ‘free beer’ but free as in ‘free speech’. In fact, ever since the first standardized coins were created in Western Turkey in the 7th Century BC, money has never been associated with all of the following 3: Open, Universal and Free. Bitcoin changed that.

I have been following Bitcoin for a while now and I have seen a whole economy of miners, mining equipment makers , payment processors, money exchangers, and speculators rising up around it. It is actually thriving. At the same time, there are a ton of people trying to make money off of it. Some are legitimate businesses and some are pure gambles.

In this article I will explain what bitcoin is, how it works and how one can start using it. I will also attempt to debunk some myths surrounding Bitcoin.

What is bitcoin?

Bitcoins are digital coins you can send through the internet. Bitcoin is the first decentralised digital currency and what this means is that unlike government-issued fiat currency, bitcoin has no central issuing authority. In other words, no Central Bank controls it, so government can’t just print or mint the more of the currency.

How are Bitcoins created?

Just as in the old days when gold and silver were mined, bitcoins are mined digitally. Mining is a slow process of using powerful computers to solve complex math problems and when they succeed they unearth more Bitcoins. Bitcoins are generated all over the internet by anyone running a free application called a bitcoin miner. The more Bitcoins that are mined, the more difficult it gets to mine more.

Key facts about Bitcoin
  1. Bitcoin was created by a Japanese personality called Satoshi Nakamoto. Nobody know who he is. This kinda rang a bell . Most people believe this is a pseudonym and there are more people behind the creation of Bitcoin
  2. Bitcoin is a digital currency and bitcoins are stored in a digital wallet
  3. Bitcoin is abbreviated as BTC
  4. Like gold and silver, we don’t have an unlimited number of bitcoins. There will only be about 21 million bitcoins made. That number will be reached in 2140
  5. Just over 16 million bitcoins have been mined so far
  6. At the time of this writing, 329,153 bitcoin transactions have been made in the last 24 hours
  7. Several exchanges exist where you can trade your Bitcoins for real money
Advantages of Bitcoin (compared to the alternatives)
  • Transactions are cheap and mostly free. And it’s very difficult to find something cheaper than free.
  • You can use them in every country (Yes, Including Kenya)
  • Your account cannot be frozen
  • There are no prerequisites or arbitrary limits
  • It has built in protection against double spending
The Risks of Bitcoin (apart from the fact that it could all be a a bubble or a pyramid scheme)
  • Your wallet can be hacked
  • They can drop in value right after you buy them. Bitcoin fluctuate wildly in value over short periods of time
  • Government could step in and try to regulate it. The two biggest economies in the World, USA and China, have been moving towards that direction
  • Transactions are uninsured and totally irreversible. CBK Governor, Patrick Njoroge, said there is no consumer protection for bitcoin in Kenya
  • It’s traceable – the whole network sees that a particular transaction happened, and that money moved from one place to another place. It is possible however to make a payment without attaching your identity to the payment
  • It can be used to launder money. But regulators have already started applying Anti-Money Laundering (AML) restrictions
Interesting stuff about Bitcoin
  1. Someone in Cyprus has built a bitcoin ATM
  2. Those in Kenya can now link their bitcoin wallet to their M-pesa wallet

Click on the next page to know how to obtain Bitcoins in Kenya and how to use them