What is Bitcoin and Should You Invest in It?
If you’re like most people, you’ve probably heard of bitcoin. Also, if you’re like most people, you’re probably confused about what bitcoin is. Bitcoin started making the rounds on the internet a few years ago. Stories abound of people who are risking their retirement savings and even taking out second mortgages to invest in it. But what exactly is bitcoin, and should you jump onto the investment bandwagon? This article will break down everything you’ve been wondering about the digital currency but have been too shy to ask.
What is Bitcoin?
Bitcoin is an unregulated digital cryptocurrency -- basically, a form of electronic cash. It is decentralized, with no central bank or administrator, meaning that it can be used between countries without conversion to other currencies. For example, Bitcoin can be used the same in the United States and Europe as it is one decentralized currency. There is no need to convert it the way you would convert US dollars to euros.
Where Did Bitcoin Come From?
The domain bitcoin.org was registered in 2008 and the same year, a paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was published to a cryptography mailing list. Bitcoin was officially developed in 2009 by an anonymous person or group of people using the name Satoshi Nakamoto. It was released as an open source code. Nakamoto mined the first blockchain with reference to the unpopular government bailouts of the big banks that had spurred the economic collapse of 2008.
How Can You Get Your Hands on Bitcoin?
Technically, of course, you can't actually get your hands on bitcoin because it is completely electronic, but there are a couple of ways to get a hold of bitcoin currency. One is by mining. Bitcoin miners use specialized software that solves complicated algorithms and in turn, are rewarded authors bitcoins. The process adds transactions to the blockchain, which is a public record of transactions. Miners help keep the system going since there is no central bank or administrator for the digital currency. The process of mining is intentionally difficult and uses a lot of energy which limits the number of blocks each day. Each block must include proof of work. The amount of bitcoin to be ever available is set at 21 million, which will help it maintain its value. At the current rate, bitcoins can continue to be mined through 2140 before hitting the 21 million mark.
Most people simply don't have the resources to mine bitcoin, so most likely your best bet is to purchase bitcoins. There are a number of platforms where you can do this, such as Coinbase, but you want to be careful that you are choosing a legitimate bitcoin platform and not falling prey to a scam. You can buy bitcoins using your traditional credit card or bank account. The price of bitcoins fluctuates from day to day, based on how many people want to buy it. This is essentially what is giving bitcoins their value. In 2011, a bitcoin was worth $0.30. At the time of this writing, each bitcoin is going for $6,386.22. It's all-time high of $19,666 occurred in December 2017.
What Can You Buy with Bitcoin?
What's the point of having money if you aren't going to spend it? If you're wondering what you can buy with bitcoin, you'd be surprised by the number of possibilities.
- The Pembury Tavern in East London is a bitcoin pub, where you can purchase a beer with your bitcoins.
- Dallas Mavericks team owner Mark Cuban says that you will soon be able to buy basketball tickets with the cryptocurrency.
- A plastic surgery practice in Manhattan called bodySCULPT accepts bitcoin payment.
- A Burger King in the Netherlands has been accepting bitcoins since 2016
- Certain real estate properties can be purchased with bitcoins.
- Luxury watch seller JavyEstrella.com accepts bitcoin payments.
- The Great Lost Bear bar in Portland, Maine allows payment with bitcoins for all of their beverages and food, including "Maine's finest" cheese fries.
- The Golden Gate Hotel & Casino and the D Las Vegas in Las Vegas accepts bitcoins at their front desks, gift shops, and restaurants.
- A Subway franchise in Allentown, Pennsylvania allows customers to purchase their sandwiches with bitcoins.
- You can use the digital currency to buy anything at Overstock.com.
- Pay for your next vacation using bitcoins when you book on CheapAir.com or Expedia.
- Make a charitable donation to Autism Speaks, United Way, The Water Project, or Heifer International using bitcoins.
Why Would You Want to Make Purchases with Bitcoins?
Bitcoin is often considered more secure than paying for things with your credit card or bank account. Bitcoin allows you to purchase things anonymously since they aren't tied to things like your social security number, which is needed for opening up credit card and bank accounts. Unfortunately, this anonymity has made bitcoin the payment method of choice for criminals on the darknet. Thus far, bitcoin has never been hacked.
Should You Invest in Bitcoin?
This is a tricky question to answer. While it makes sense to diversify your portfolio, you shouldn't invest all of your money into bitcoin. It's a good idea to invest only what you can afford to lose should it go belly-up. Bitcoin enthusiasts argue that any fluctuations in value are normal since this is a newly developing system. Billionaire investor Warren Buffett, on the other hand, believes that there is a bitcoin bubble that is bound to burst. Whether you decide to take the risk to invest in bitcoin needs to be a personal choice.