12/07/2017
How Bitcoin works
To process bitcoin transactions, a procedure called "mining" must take place, which involves a computer solving a difficult mathematical problem with a 64-digit solution.
For each problem solved, one block of bitcoins is processed. In addition, the miner is rewarded with new bitcoins.
This provides an incentive for people to provide computer processing power to solve the problems.
To compensate for the growing power of computer chips, the difficulty of the puzzles is adjusted to ensure a steady stream of new bitcoins are produced each day.
There are currently about 15 million bitcoins in existence.
To receive a bitcoin, a user must have a Bitcoin address - a string of 27-34 letters and numbers - which acts as a kind of virtual post-box to and from which the bitcoins are sent.
Since there is no register of these addresses, people can use them to protect their anonymity when making a transaction.
These addresses are in turn stored in Bitcoin wallets, which are used to manage savings.
They operate like privately run bank accounts - with the proviso that if the data is lost, so are the bitcoins owned.
