LIFESTYLE

What Is Bitcoin All About And How Do I Get It?

They say it's safer, faster and cheaper.

29/09/2017 06:04 SAST | Updated 10/10/2017 12:09 SAST
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A single bitcoin coin.

Supermarket chain Pick n Pay recently announced that it would pilot bitcoin payments in-store at its head office in Cape Town. The grocery retail store is the first in the country to try out the relatively new alternative payment concept.

Although 90 percent of payments in South Africa are still cash-based, "bitcoin interest and adoption in South Africa is taking off big time", according to bitcoin company Luno.

What is Bitcoin?

Bitcoin is a currency, much like the rand or the dollar -- only it is digital.

It is considered the first decentralised digital currency, with no company or entity controlling it.

This implies, among other things, one can send money immediately all over the world, without having to go through a middleman such as a bank or a credit card company.

According to Bitcoinzar, bitcoin is the largest of its kind in terms of market value.

How does it work?

You can buy bitcoins online by opening a bitcoin account, called a wallet, and you will get the coins at current exchange rates. A wallet is like a bank account, without a bank.

Physical coins can also be ordered from reputable producers. Each physical coin has an online address that you can access with a password, called a private key. Then you can transfer the coin to your wallet or spend it right away.

How you can spend the coins

  • You can spend them on online purchases. The seller must also have a bitcoin wallet.
  • At bitcoin-friendly shops. You use your smartphone to scan the code on the bill.
  • You can exchange it with other currencies.

Here is a list of online and offline stores in South Africa, where one can make purchases using bitcoin.

'Miners'

The bitcoin network has individuals called "miners" whose job is to verify transactions, in an attempt to make the process more secure. Their job is similar to that of bookkeepers. The transactions are recorded in a public ledger, visible to anyone in the network, much like a central ledger used by banks to keep a record of all transactions. This is to make sure that people do not cheat by double-spending using one bitcoin.

Miners also get rewarded for this job.

Advantages

  • According to Luno, using bitcoin is safer because the user behind the coin's address remains unknown. It is also more private in this way, unlike submitting your personal credentials to a third party when transacting online.
  • It is cheaper compared to bank and credit card transaction fees that are higher.
  • It is faster because you can transact anywhere and there are no delays because of, for example, clearance issues.
  • Bitcoins are also technically possible to roll out quickly

Disadvantages

  • Bitcoin does not have the same consumer protection one would find with banks as it operates outside of these regulations.
  • Owing to the volatility of the market, the price of bitcoin can increase or decrease without prediction, cautions an international bitcoin company.
  • There are a growing number of scammers -- who promise to double your bitcoins or give you unreliably high interest.
  • Criminal activities such as money-laundering could be encouraged. Criminals can be paid in the virtual currency because it's not regulated or monitored by financial authorities.