Edinburgh Napier University

  Imagine being told that your wage was going to be cut in half. Well, that’s what’s soon going to happen to those who make money from Bitcoin mining, the process of earning the online currency Bitcoin.

The current expected date for this change is 11 July 2016. Many see this as the day when Bitcoin prices will rocket and when Bitcoin owners could make a great deal of money. Others see it as the start of a Bitcoin crash. At present no one quite knows which way it will go.

Bitcoin was created in 2009 by someone known as Satoshi Nakamoto, borrowing from a whole lot of research methods. It is a cryptocurrency, meaning it uses digital encryption techniques to create bitcoins and secure financial transactions. It doesn’t need a central government or organisation to regulate it, nor a broker to manage payments.

Conventional currencies usually have a central bank that creates money and controls its supply. Bitcoin is instead created when individuals “mine” for it by using their computers to perform complex calculations through special software. The algorithm behind Bitcoin is designed to limit the number of bitcoins that can ever be created.

All Bitcoin transactions are recorded on a public database known as a blockchain. Every time someone mines for Bitcoin, it is recorded with a new block that is transmitted to every Bitcoin app across the network, like a bank updating its online records.