As we already know, Bitcoin has been a hot topic of conversation for the last year or so. In spite of its popularity in the media and online, many are still, surprisingly, unsure of what exactly Bitcoin is and how it works. In order to shed some light on this topic, let us explore the ins and outs of Bitcoin, as well as its affiliated technologies. The most important ideas to cover are listed below in no particular order:
- What is Bitcoin?
- Blockchain technology
- Increased privacy
- Other cryptocurrencies
- Investment risks
What is Bitcoin?
Bitcoin is a cryptocurrency which means that massive amounts of digital encryption are used in the creation of a currency that virtually eliminates the need for a centralized bank as well as cutting down on the possibility of counterfeiting and fraud.
Blockchain technology is the driving force behind why Bitcoin is useful. It can be thought of as a decentralized bank of sorts. Instead of having one institution know how you have spent your money, this knowledge is spread out over thousands of servers across the globe. This keeps any one entity from being vulnerable to a cyber attack.
When payment is made with traditional currency, there is some sort of paper trail that connects the consumer to that purchase. Thanks to technologies like bitcoin and blockchain, purchases can now be made anonymously. This can aid in increasing the safety of consumers over time.
There are tons of other cryptocurrencies on the market today. Others have the same general premise as Bitcoin and can be purchased on a variety of exchanges just like stocks are available on exchanges. As with any new form of technology, it is important to look out for scams and companies who are using similar names just to increase the investment in their company.
New technologies and investments come with innate risks. As people speculate on whether or not the price of Bitcoin will rise or fall, large sums of money are quickly entering this sector of the market. Therefore, it is important to understand that Bitcoin is an investment and investments always have to possibility of losing value. Always be prepared for market downturns.
Only time will tell if cryptocurrencies like Bitcoin will be the way of the future. In the meantime, gaining as much knowledge as possible about the topic could prove to be well worth the time down the road.