Bitcoin for Beginners

Words like “Bitcoin” and “blockchain” are repeated daily in several stories in both the daily financial and internet news, not to mention in several social media discussions by news and business personalities. For the average consumer, the terms can be easily conflated or confused, especially as most mentions in the media are about the current value trends of Bitcoin or a few informational tidbits about blockchain itself. In order to understand the media attention of Bitcoin, it first must be understood what it is exactly.

 

Bitcoin is what is referred to as a decentralized cryptocurrency. What that means is that Bitcoin is a digital form of currency whose value is not backed by gold, silver, or any government tender, but is extremely secure due to the underlying technology that keeps records of trade. This technology is known as blockchain technology. The popularity of Bitcoin and other decentralized cryptocurrencies is due to the underlying blockchain, which keeps a sort of digital ledger that is itself decentralized across a wide network of systems.

 

Another factor in the popularity of Bitcoin is due to speculation and investment in the cryptocurrency by many investors, both large and small. The central idea is that Bitcoin will be used more regularly over time, becoming more valuable over time. This certainly follows recent history, as the first increase in value in 2010 raised the price of one Bitcoin to eight cents. In today’s market, one Bitcoin is worth over $60,000.

 

As popular and lucrative as Bitcoin has proven to be so far in the market, the cryptocurrency market itself is extremely volatile. All cryptocurrency, including Bitcoin, is valued by speculation, as opposed to actual investment. It is not uncommon for one cryptocurrency to lose a significant portion of its value in a matter of days, or for one cryptocurrency to balloon in value in the market over the same amount of time.

 

The primary way to invest in Bitcoin (or any cryptocurrency, for that matter) is to have a “wallet,” or an online reservoir for your purchased Bitcoin. A number of brokers and trading sites offer this service to consumers, such as CoinBase, Robinhood, and eToro.      

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