As the Russian invasion of Ukraine continues and Western economic sanctions against Vladimir Putin’s regime escalate, many observers are concerned about the possible use of cryptocurrencies to circumvent them.
What is Bitcoin?
Bitcoin is a purely online currency created from computer code, in circulation since 2009. The identity of its creator or creators remains a mystery.
Unlike traditional currencies, it has no central bank and is not backed by any government.
Instead, its community of users control and regulate it via the block chain, a shared public ledger on which the entire Bitcoin network relies. It’s a mathematical process designed to provide anonymous and secure transfers.
How does it work?
To get started, users can install a bitcoin wallet on their computer or phone which generates an address, unique to each transaction.
They can use this to buy goods and services or other currencies.
Each transaction is validated by members of the community by tracing the origin of each bitcoin using special software. This is known as mining.
The process is intended to ensure that no single bitcoin can be spent in more than one place simultaneously.
Members of the network – known as miners – are pitted against one another as they race to solve increasingly complex cryptograms on extremely powerful computers. The fastest to do so are issued with new bitcoins as a reward for their efforts. This is the only way new bitcoins can be created.