The dangers of investing in cryptocurrencies
YOU won't find a Bitcoin down the back of your sofa, here is how the cryptocurrency is created and the risks of getting involved.
Bitcoin has attracted increased interest after soaring beyond $48,000 (£34,680) this week.
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Its latest surge comes after Tesla founder Elon Musk said the car company had invested $1.5 billion in Bitcoin.
You can't just buy Bitcoins from a shop or withdraw them from the bank.
The cryptocurrency is stored virtually through an online network called the blockchain.
You can invest in Bitcoin through trading platforms such as eToro or online wallet providers including Coinbase and Blockchain.
What is Bitcoin?
BITCOIN got you baffled? Here's what you need to know:
- Bitcoin is a virtual currency
- It's traded between people without the help of a bank
- Every transaction is recorded in a public ledger, or "blockchain"
- Bitcoin is created by mining
- Mining involves solving difficult maths problems using computer processors
- Bitcoin can be traded anonymously, which can make it a popular way of funding illegal activities
- The value of Bitcoin fluctuates wildly
- Bitcoin is one of many different cryptocurrencies, but by far the most popular
Before investing in any cryptocurrency, you should be aware of all the risks involved.
Their value is highly volatile and City watchdog the Financial Conduct Authority has warned investors should be prepared to lose all their money.
Investing in cryptocurrencies is not a guaranteed way to make money.
Bitcoins can no longer be mined on a standard PC or laptop.
You will need powerful graphics cards that can cost around $3,000 and a supercomputer known as a mining rig, that can cost $10,000 or more.
Bitcoin mining also requires a lot of computer power, which would push up your energy bill.
The blockchain uses 68.13 terawatt hours of power every year, CoinMarketCap said, which is the equivalent of the amount used by the Czech Republic's 10.7 million people.
A single blockchain transaction is the equivalent to the electricity that a typical US household would use in 20 days, according to figures from the Digiconomist.
Bitcoin miners tend to choose areas with low energy costs.
Russian Bitcoin mining company Bitcluster setup a base in the Arctic Circle at the end of last year where electricity prices cost just $0.03 per kilowatt-hour.
See what you can buy with Bitcoins.
People considering investing in Bitcoin or shares and stocks have been warned over ";risky" tips being shared on TikTok.
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