What is cryptocurrency?
Bitcoin was the first successful cryptocurrency, but there are many other crypto assets in use today. These “crypto assets” use an intricate transaction processing system invented by Satoshi Nakamoto called blockchain. It utilizes a huge network of computers that keep records of who owns Bitcoin and how much each person owns. These computing systems, referred to as “Bitcoin miners” provide the computing power to process large “blocks” of transactions, and they compete by processing difficult math problems to earn the right to process the next block, and they get paid for sharing their computing power. The first computer to solve it is rewarded with Bitcoin, and every computer in the network is responsible for maintaining the entire database and log of transactions.
How do cryptocurrencies work?
Cryptocurrencies are digital store of value. They are peer-to-peer systems, meaning there is no bank or central authority to validate transactions. Most operating systems use some form of cryptography for the purpose of maintaining a secure network. Cryptography is the study of mathematical algorithms used to secure information in transit, such as encrypting sensitive documents for safe storage on an individual's computer.
If stores don’t accept Bitcoin, why is it called a currency?
Although crypto assets are extremely volatile and price swings of 50% and more are not uncommon, Bitcoin is still in its infancy. Because of this, the value of crypto assets is extremely volatile, and price swings of 50% and more are not uncommon. This extreme volatility makes it extraordinarily difficult to accept Bitcoin as payment for small, frequent transactions. The price in Bitcoins of something as simple as a gallon of milk could change drastically within the same 24-hour period!
Should I invest in Bitcoin?
There are several reasons why you may want to invest in Bitcoin. If you have a large amount of money, but know that interest rates are low at the moment, and that the U.S. economy is relatively stable and growing, one good option would be to invest some of your money into Bitcoin. Bitcoin has the potential for huge capital appreciation, but just like any other investment, it comes with risk. Investors should look into all risks associated with investing in Bitcoin IF they decide to invest at all.
How does investing in Bitcoin compare to buying a stock or bond?
The biggest challenge of investing in Bitcoin is that there is no proven method of valuing it. The price of Bitcoin swings wildly, depending on how much people are willing to pay for the currency at that moment in time. Even so, if you think about buying stock in Apple or Google, you can dig into their financial statements and see what percentage their profits have grown over time. With Bitcoin, all we have to go on are a few high profile companies that operate in the same space and see a general trend.
Like stocks, bonds and other securities, there are regulated ways to invest in Bitcoin. You can purchase bitcoin futures on some exchanges, which include a real asset (such as gold) or cash as collateral. You can also buy regular bitcoins directly from any site that allows you to buy with a credit card or Paypal account.
