The Guardian’s UK technology editor, Alex Hern, talks to Rachel Humphreys about the cryptocurrency bitcoin, which allows people to bypass banks and traditional payment methods. It uses a blockchain – a shared public record of transactions – to create and track a new type of digital token, one that can only be made and shared according to the agreed-upon rules of the network. At its heart bitcoin is a big database of who owns what, and what transactions were made between those owners. But unlike a conventional bank, there is no central authority running that database.
Bitcoin’s value has recently soared and the City regulator the FSA is concerned that crypto investment firms could be overstating potential payouts or understating the risks from investing in bitcoin and products related to the digital currency. As a newer and relatively lightly regulated market, consumers are unlikely to have access to state-backed compensation if something goes wrong. There has also been a boom in bitcoin scams.
Alex tells Rachel why he thinks bitcoin’s use is limited and discusses whether it should be banned.
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Photograph: Dado Ruvić/Reuters
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