Tesla has joined thousands of other companies around the world by allowing customers to pay using bitcoin from this week.
The electric car maker has even gone a step further by setting up its own node on the cryptocurrency’s network, meaning it will not need to rely on any third-party digital wallet or custody services to receive payments.
The cryptocurrency’s recent price rally – it is trading above $50,000 at the time of writing – means a single bitcoin is now enough to purchase a Tesla. Five years ago, it would have taken at least 100 bitcoins to afford one.
So how does the process of acquiring, storing and spending bitcoin actually work? We’ve put together a guide explaining everything you need to know.
What is it and how do you get it?
Bitcoin was conceived in 2008 by the pseudonymous Satoshi Nakamoto as a form of “peer-to-peer electronic cash system”, meaning it is entirely decentralised and does not require banks, governments or any single organisation to operate.
There are three ways to acquire bitcoin: You can digitally mine it, you can buy it, or you can receive it as a payment or gift from someone.
The vast computing power required to mine it means this option is not practical for most people new to cryptocurrency. The easiest way into bitcoin is to just buy some, with through an exchange or with cash using a bitcoin ATM.
Established cryptocurrency exchanges like Binance, Coinbase or Uphold are generally the most user friendly and allow people to buy bitcoin and other cryptocurrencies via bank transfers, as well as through credit and debit card payments. Various identity and security checks can make setting up an account a time consuming process.
Once you have the cryptocurrency you can easily transfer it to other digital wallets – both online and offline – or spend it by sending it to someone else’s wallet. To do this, you need to know their wallet address: a long string of numbers and letters that can be represented in the form of a QR code.
Tesla has warned its customers that they risk losing an entire car’s worth of bitcoin if they do not put in the exact wallet address when making a purchase.
The firm’s terms and conditions warn in capital letters that it is “your responsibility to confirm and verify” that the code…