Good Question: How Does Bitcoin Work?

MINNEAPOLIS (WCCO) –– The hackers behind Friday’s massive cyber attack asked their victims for $300 worth of bitcoin.

That’s the ransom they wanted to unlock their victims’ data. The digital currency is used illegally and legally all over the world.

So, how does bitcoin work? Good Question.

At Elevated Beer Wine & Spirits, you can pay with bitcoin. They get one or two transactions a week.

“For us, it’s really just a matter of supporting the technology,” owner Ryan said.

A technology that began in 2009 and now reportedly measures 300,000 transactions each day.

“It’s currency that exists as bits and bytes on the internet,” Chris Schulte said.

Schulte is a computer forensic consultant.

“It’s not controlled by a single authority, it’s not controlled by a government, it’s not controlled or regulated by a corporation. It’s basically freeform digital money that exists only online,” he said.

It’s anonymous — which is why criminals like it. It’s also decentralized, doesn’t require physical money and fluctuates in value, which is why investors and early adopters like it too.

“The price is going up, so I’ve been holding my bitcoin,” Ryan said.

To get bitcoin, you go to an exchange online. So, WCCO’s Heather Brown went there, signed up and attempted to buy some. Monday afternoon, one bitcoin was worth slightly more than $1700.

You can pay in a number of ways — PayPal, bank account, credit or debit card.

Heather enters her info and a minute later…

“Oh man, I don’t know what I’m doing,” she said.

“It is complicated. It is a little bit confusing,” Schulte said.

In some cases, it can take days to set up. With a little more time, we would have figured it out.

“Once you get your money into bitcoin, you have something called a bitcoin wallet or a bitcoin address and that address is a long string of numbers and letters that looks pretty random, but you use that address to send money,” Schulte said.

Ryan at Elevated showed us how it’s done. He has an app on his phone that pulls up his bitcoin wallet. It talks to the software on his register.

“For us, it really doesn’t take that much longer than a credit card transaction,” he said.

And now, time will have to tell us if it’ll really take off.

There is another way to get bitcoins — it’s called mining.

Basically, it’s people lending computer power to verify the transactions.

That’s one way the network tries to keep system secure.

 

More from Heather Brown
Comments

One Comment

  1. Bitcoin isn’t as anonymous as people think. It is possible to track the bitcoin thanks to the public record of all transactions. When you turn the bitcoin back into a normal currency law enforcement can then use the exchange to get your info. It is a much more difficult thing to track than an online bank payment but a number of companies exist to help law enforcement with this problem. Some are already watching the wannacry BTC address waiting for them to move the funds so they can ID the people behind it.

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