A fast guide to cryptocurrency's golden child.
đź‘Śhe financial world can't stop talking about bitcoin. In recent weeks, the headlines of business journals and finance sections have covered everything from the importance of investing in bitcoin to how the bubble is about to burst (within days of bitcoin futures hitting the stock exchange). To anyone on the outside, those words make no sense.
But that doesn’t mean that bitcoin isn’t on the average American’s radar. Introduced in 2009, bitcoin is an anonymous cryptocurrency, or a form of currency that exists digitally through encryption. It was invented to be unhackable, untraceable, and safe for investors. The value started out insanely cheap and hit a bump in 2013 that took it to about $250 per bitcoin. Once bitcoin futures hit the CME Group, the price of bitcoin skyrocketed to nearly $20,000. Think of it this way: If you'd invested $100 on January 1, 2011, when one bitcoin was valued at .30 cents, those bitcoins could be worth around $5 million today.
So, at least for now, it’s not going away. Here's a quick rundown on what the hell bitcoin actually is.
How does bitcoin work?
Bitcoin is a cryptocurrency that is conducted on a public ledger, the "blockchain." Digitally transferred, it exists only online. Much like gold, it can have monetary value while also being a commodity, but it’s still its own currency. It is also decentralized and not managed by a single entity, but rather a group of people who process transactions, called miners. This means it is not subject to government regulations when traded or spent, and you don't need a bank to use it.
Explain this blockchain.
Miners are in charge of making sure bitcoin transactions made by users are recorded and legit. Simply put, they do this by grouping every new bitcoin transaction made during a set time frame into a block. Once a block is made, it is added to the chain, which is linked together with a complex cryptography. This chain of blocks is the public ledger, and its extreme complexity is what currently protects transactions.
Just like any investment, it’s best to consult someone who is well-versed in making investments. But a good rule is to not invest any more than you’re willing to lose. Cryptocurrency can be volatile, growing and plummeting in terms of value every day. If you're still intrigued, there’s a number of apps you can download on your phone to get started investing, like Coinbase, Blockfolio, and Bitstamp. These apps are also "digital wallets" that store your bitcoin.
The most convenient and popular seems to be Coinbase. It’s an app that you can download on your phone and invest up to $750 a week. It’s secure, but then again, it garnered some buzzy headlines last week for insider trading.
Wait. Insider trading? Isn’t that the point of b—
Yeah, who knows. But Bitcoin CEO Roger Ver defended Coinbase and said that it’s not a call for further regulation, and then referenced a couple of economists who support insider trading.
People didn’t love that answer, but that’s the world you’re investing in. So, get your bitcoin and head to the Digital Wild West.