Bitcoin. It’s a digital currency, a new form of money.
And it’s one of the hottest investments around. But what is Bitcoin? And is it worth the risk?.
What is Bitcoin?
Bitcoin is a digital or virtual currency that uses peer-to-peer technology to facilitate instant payments. It was created by an anonymous person or group of people under the name Satoshi Nakamoto in 2009.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.
Bitcoin can be used to buy things electronically. In that sense, it’s like conventional dollars, euros, or yen, which are also traded digitally. However, bitcoin’s most important characteristic is that it is decentralized.
No single institution controls the bitcoin network. This puts some people at ease, because it means that a large bank can’t control their money.
Is Bitcoin safe?
Bitcoin isn’t backed by a government or central bank. That means there’s no central authority to issue new money or keep track of transactions. Transactions are instead recorded on a decentralized public ledger called a blockchain.
Bitcoin is also unique in that there are a finite number of them: 21 million. That number can’t be increased, which means that bitcoins can’t be inflationary like fiat currencies.
One risk with bitcoins is that hackers could steal them by gaining access to bitcoin wallets. That’s why it’s important to keep your wallet in a secure place. Another risk is that the value of bitcoins could drop precipitously if demand falls or if there’s another major market crash similar to the one we experienced in 2008-2009 when Lehman Brothers went bankrupt and the stock market plunged by 50%. Finally, there’s always the possibility of human error (i.e.
, somebody making a mistake when entering transaction details into the blockchain). If that happens and somebody loses their bitcoins as a result, there’s no way to get them back.
Should you invest in Bitcoin?
If you’re thinking about investing in Bitcoin, it’s important to understand the risks involved before you dive in headfirst. That said, if you’re still interested in investing in Bitcoin, do your own research and make sure you understand how the cryptocurrency works before you invest any money.