We’ve all heard of Bitcoin. We’ve heard people make a lot of money from it, questions and controversies about how its value fluctuates, and people losing money after investing in it.
It is Bitcoin, the seemingly ubiquitous form of so-called “cryptocurrency” that is suddenly everywhere and yet somehow nowhere.
You may have thought about Bitcoin and whether it is a viable investment strategy, maybe even the currency of the future, but not sure where to start. A few basics can help you understand if Bitcoin is right for you and get you started.
What is Bitcoin?
Bitcoin is one of many forms of cryptocurrency, essentially a digital form of currency commonly referred to as coins. Government agencies generally do not regulate cryptocurrencies. Instead, those who trade them and use them to make online purchases attribute their value to them. These currencies, including bitcoin, rely on “blockchain” technology – a decentralized ledger of all transactions using cryptocurrency. One important thing to understand about cryptocurrency is that it is used on a peer-to-peer system, meaning that no centralized bank or authority is involved in its production or use.
Who did that?
There is an ongoing debate as to the true identity of Bitcoin’s creator, known online as Satoshi Nakamoto. In a 2008 white paper, Nakamoto described the goal of creating a “peer-to-peer electronic cash system”. As the first and most common cryptocurrency, Bitcoin has the largest market share with a market cap of $1.1 trillion.
Where does it come from?
Bitcoin and all other cryptocurrencies are created in a process called “mining”. Computers compete to solve mathematical equations to create a new block on the blockchain. Whoever solves the equation first will be rewarded with new bitcoins. Bitcoin can also be bought for regular currency like dollars through online accounts. The process is similar to buying a stock.
Photo: Anchi via iStock.com
How do I invest in Bitcoin?
If you want to invest in bitcoin, the first step is to choose a bitcoin wallet in which to store your bitcoin. Then join a bitcoin exchange — essentially a marketplace for buying and selling bitcoins. There are many of these exchanges, so do a little research and find the one that suits you best. Then connect your wallet to your bank account and place an order for bitcoin. You then manage this investment in the same way as others, e.g. B. Stocks. Pay attention to what’s going on in the bitcoin marketplace and do your best to make an intelligent decision about whether to keep or sell your bitcoin. You can also use it to do some shopping.
How much does bitcoin cost?
As with any currency, Bitcoin’s value against the dollar fluctuates daily due to market changes. It recently hit an all-time high of over $60,000 per bitcoin. There are cheaper cryptocurrencies out there, but they will likely yield lower returns over time as they are less used and less well known.
Should I invest in Bitcoin?
As with any investment, you should do your due diligence before committing yourself to Bitcoin. With cryptocurrency, it’s more complicated because it means learning the ins and outs of an entirely new, all-digital system. You should have a good understanding of blockchain, cryptocurrency and bitcoin before investing. Talk to your financial advisor to determine if bitcoin is a good investment for you, and remember that all investments come with risk.
Bitcoin is still new in the grand scheme of currencies and trading platforms, but it has potential benefits and rewards. Although difficult to understand at first, this digital currency has real value in some circles, and many see it as the currency of the future. Since the owners trade it on a decentralized ledger, it is considered by some to be more secure than typical currencies. As with any investment, there are risks, but they are worth learning about.