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The future of money

Is bitcoin the future of money? The biggest type of cryptocurrency has rocketed in value. But Jordan Belfort, a famous man who knows a lot about finance, has called it "the biggest scam ever". Very simply, what is bitcoin? A: A digital currency, created and held electronically, in digital wallets. Digital means it is only used in computer formats. Bitcoin is a cryptocurrency (crypto means hidden or secret). It is encrypted (which means handled in computer code) digital money created and used on computers. Some people think it could be the future of banking because it is outside the control of governments. Why is it in the news? A: The value of bitcoin has jumped by a factor of five in the last seven months (meaning it is worth five times more). On March 25th this year, one bitcoin was worth $964.69. Now it is worth $5,518.85. Its value is predicted to keep on rising. Some believe it could reach a value of $10,000 by 2019. What explains this rise? A: The rapid rise from April onwards can partly be explained by Japan's actions. The Japanese have legalised it in their country which means it can be used as an official method of payment. Japan's actions were a huge step towards making bitcoin mainstream. How does it work? A: Unlike normal currenciesA currency's value is dictated by the amount investors are willing to pay for it on international markets, and reflects their confidence in a nation's economy. Even if you do not buy things abroad yourself, others will do so and the way they spend their money has an impact on you - for example, by creating jobs and encouraging people to spend. bitcoin has no real, solid existence like notes or coins. People with bitcoin cannot go into a bitcoin bank to withdraw cash as you can if you bank with a high-street bank like HSBCA bank which operates in many countries around the world. Banks provide financial services to customers such as accounts and loans., for example. Bitcoin is underpinned by a computer network made up of its users' machines. Currency is mathematically generated in a complex process known as "mining". How does the maths work?: A: Bitcoin runs on a technology called blockchain. Completed "blocks" are added to a constantly growing record that is kept securely and permanently on a computer. The mathematics of the system were set up so that it becomes more and more difficult to "mine" bitcoins over time. The total number that can ever be mined is limited to around 21m. What is it used for? A: Roughly 5.8m people have cryptocurrency wallets (in digital or computer format) and use these in many different ways. Some use the currency to fund companies because it is easier to move money from one place to another and there are no transaction fees. It is also accepted at a handful of shops. Two weeks ago a house in west London went on the market valued at 17m. Its owners would only accept payment in bitcoin. But the most common answer, for now, is nothing. Many people simply hold their bitcoins as an investment, hoping they will become more valuable. Isn't bitcoin a bit dodgy? A: It is almost impossible to tie a bitcoin wallet to an individual so it is very hard to trace payments. This means that it is an attractive form of currency for criminals. It is therefore associated with criminal activity such as cyber crime or money launderingMaking money acquired illegally seem to have come from a legitimate source, often by feeding it into the income stream of a legitimate organisation.. It is also a common way of purchasing illegal goods. Most bitcoin payments, however, are innocent. Will it last?: A: There are two reasons it might not. First, it is unstable. Because the currency has become more popular very quickly many think that we are in a "bitcoin bubble" which will burst. Bitcoin has also suffered hacking attacks which cause the value to go down. Second, if bitcoin became more mainstream then governments are more likely to regulateMake rules or create a group to control an activity. it heavily as they have done with other banks for hundreds of years. This said, Adam Davies, a major technology consultant, believes we could be "about five years away" from it being used as much as mainstream currenciesMainstream means shared by most people. Currencies of big countries with powerful economies, such as the US dollar or the Japanese yen, because they are regarded as strong and secure, can be used to pay for goods or services in other countries.. Investment: To put money in a scheme for saving, or in property, or in a business with the intention of making more money.KeywordsCurrencies - A currency's value is dictated by the amount investors are willing to pay for it on international markets, and reflects their confidence in a nation's economy. Even if you do not buy things abroad yourself, others will do so and the way they spend their money has an impact on you - for example, by creating jobs and encouraging people to spend.

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