Bitcoins are taking the world by storm. Now, the digital currency has come to Leicester. Business Reporter Isobel Frodsham spoke to three city men who are promoting them
Bitcoin is the digital currency that brings shivers to taxmen and failed hackers everywhere. And yet, for one mysterious character, presumed to be a Japanese businessman or group of business people, it has been the key to his/their success.
Bitcoin was invented by cryptographer Satoshi Nakamoto in 2009 following the 2008 banking crisis.
As inspired by the file-sharing website BitTorrent, the digital currency works by making copies of the list of people who have made Bitcoin transactions, known as the Blockchain.
People can earn Bitcoins by a process known as mining, where they solve a difficult mathematical problem that has a 64-character solution.
Each Bitcoin is then sent to the person's Bitcoin address, which is a random generated code that is 27 to 34 letters and numbers long, and then turned into a virtual wallet. When the Mercury went to press, one Bitcoin was equal to £307.72.
And now, thanks to former car dealership and funeral business manager Don Simpson, funeral director Paul Asher and musician Paul Cole, Bitcoins have officially arrived in Leicester.
The three men joined together to create a Bitcoin event, dubbed the Bit Bizaar, where people could buy and sell products using Bitcoins.
Don said: "We wanted to bring Bitcoin to Leicester because we wanted to provide a place where people can buy and sell products using Bitcoin.
"The event was just like eBay in real life, but without the transaction costs."
Don, the former manager of an Alpha Romeo dealership and a Co-op funeral directors, first noticed Bitcoin 18 months ago.
He said: "I decided to buy Bitcoin as an investment.
"Back then, when they first came about, they were £70 per Bitcoin, whereas now they are so much more.
"But they are a brand new form of currency and are volatile."
Paul, who runs Paul Asher Family Funeral Directors in Aylestone Road, is one of the first businesses in Leicester that now accepts Bitcoin as a payment method.
He said: "I decided to accept it because it is just another form of currency. It still has value and can be exchanged for goods available at my business.
"We haven't had anyone come in and use it yet but it is still early days.
"I believe I am the only funeral director in Leicester that accepts Bitcoins. I don't think there is anyone else."
In the past five years, as Bitcoin has become more popular, the price of it has shot up considerably.
Famous fans of the currency include X Factor judge and former Spice Girl Mel B, actor Ashton Kutcher, and actress and comedienne Roseanne Barr.
Paul said: "There are not a lot of places in Leicester that will accept them at all but more people are using them and more retail outlets are accepting them.
"I think it still needs a bit of promoting. Bitcoin is certainly better than credit cards for businesses, because credit cards charge businesses between two and four per cent to use them."
Paul Cole, a drum teacher and session musician, has been interested in Bitcoin since it hit the headlines back in 2008.
He said: "When we discussed the idea of bringing it here, we thought 'Why not Leicester?' There are already places in London that accept Bitcoin and there is a good market here.
"We are trying to do a good thing by putting it out there and we thought it would be helpful to get people to use it. The quicker it grows the better.
"A great aspect of Bitcoin is the fact that it is decentralised, so it is personal to each individual that uses it.
"The Blockchain is also fantastic because there is no threat party involved. If you do not fufill your part of the contract in the Blockchain, it dissolves.
"It is the solution to the unfound money system and solves the problems of Government monopoly, which leads to poverty and war, by taking the need for governmental systems and banks out of the equation and allowing people to have full control of their money."
The idea of digital currencies has been around since the 1990s. In 1992, a group of powerful software programmers and cryptographers, called the Cypherpunks, gathered together in San Francisco to discuss how cryptography could be used to solve money problems by taking politics and banks out of the equasion.
However, the Cypherpunks found it was difficult to create a digital currency without stopping hackers from being able to make counterfeit copies from the digital tokens.
Another issue was the double spending problem, where it is possible to spend one digital token twice.
But in 2008 after the banking crisis, Satoshi Nakamoto revisited the idea of digital currencies after being inspired by the file-sharing website BitTorrent.
Unlike the original file-sharing website Napster, BitTorrent works in a decentralised way.
Rather than storing a file in one place, it takes the file, chops it up into small pieces and distributes the copies across servers everywhere, therefore making it difficult to be cut off by the authorities.
Nakamoto applied this logic to the digital currency problem, and worked out that the way to make digital currency work was to not make copies of the digital tokens, but to make copies of the ledger, known as a Blockchain.
To battle the issues of counterfeit copies of Bitcoin being made, Nakamoto made sure that to keep the validity of the ledger, each copy had to be a perfect copy, and any fake copies would be rejected instantly and dropped from the Blockchain, meaning the fraudsters would be blocked from the Bitcoin system.
Despite the seemingly positive aspects of it, Bitcoin has been criticised for its payment role in the former drug trafficking website, Silk Road, and the fact that it is unregulated.
Earlier this month, the Telegraph reported that Chancellor of the Exchequer, George Osborne, had instructed Treasury officials to study Bitcoin and whether or not it should be regulated.
However, Don and the two Pauls said they disagreed with these plans.
Don said: "We can regulate it ourselves. Some people, especially George Osborne, do not know how it works because if he did, he wouldn't have made that statement."
This story will appear in the Business Monthly magazine, which comes free with the Leicester Mercury tomorrow (August 19). For more Leicestershire business stories go to leicestermercury.co.uk/business
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