In George Osborne's budget, announced on the 18th March 2015, the UK will implement regulations and anti- money laundering rules to allow Bitcoin to be used more freely in business transactions in the UK. The US are also considering a Bitcoin licence. This could pave the way for UK bank accounts in Bitcoin so that they can be used for day to day business. It is therefore hardly surprising that globally the Bitcoin sector has attracted $660m of venture capital investment. Lawyers should be holding a watching brief over this development, as it has some interesting possibilities for law firms and their clients.
Users willing to devote CPU power to running a special piece of software would be called miners and would form a network to maintain the block chain collectively. In the process, they would also generate new currency. Transactions would be broadcast to the network, and computers running the software would compete to solve irreversible cryptographic puzzles that contain data from several transactions. The first miner to solve each puzzle would be awarded 50 new bitcoins, and the associated block of transactions would be added to the chain. The difficulty of each puzzle would increase as the number of miners increased, which would keep production to one block of transactions roughly every 10 minutes.