WTF Is Bitcoin?

Cryptocurrency can seem, well, cryptic. But with one in four Millennials investing, it’s never been more relevant. We spoke to the specialists to decode it for you

- Zoya Pon

First, WTAF?

Cryptocurrency – such as bitcoin – is digital currency that can be bought and sold online. The tech that makes it work is blockchain, complex computer coding and maths equations (cryptography) that make up the public log of all coin transactions. ‘Blockchain is a distributed database of who owns what, like a ledger,’ says Warrick Erlank, portfolio manager at local crypto asset manager Virtue Digital Assets. Blockchain is also what works to keep your buying, selling and storing of crypto-currencies as secure as possible.

It all started in 2009, when an anonymous person/group created bitcoin under the alias Satoshi Nakamoto. In 2017, bitcoin went mainstream, with value reaching US$20 000 (about R240 000) for one coin. Interest in crypto is mostly thanks to Millennials: according to a survey by Blockchain Capital, one in four Millennials is investing. But how – and why?

Making bank

There are three main ways to make money out of cryptocurrency: mining, trading and investing.

Miners have fancy computers and make money by processing/ authenticating crypto transactions, Erlank explains. ‘In exchange, they get paid in the cryptocurrency they’re working on. They also help to keep the network secure.’

Because cryptocurrency values fluctuate, you can also make money by trading and investing in them. ‘There’s a finite supply of well-known cryptocurrencies,’ says Erlank. ‘The higher the demand, the more the price increases.’