Over recent months and years, you have no doubt heard about cryptocurrency, or Bitcoin. Unless you are technologically minded, the concept has no doubt proved baffling. Especially when you hear how how excited people get about it. And by how much money has been gained and lost and gained again by investors.
What is it? Is it like Monopoly money? What can you get with it? The following article discusses common terminology associated with Bitcoin, as well as a general assessment of its safety as an investment option.
Bitcoin is the first, and still most recognizable, forms of cryptocurrency. In fact, the two are almost synonymous. It has no physical form. (Although, you may recognize the symbolic coins, pictured above.) A group of unknown people using the name Satoshi Nakamoto first created this virtual currency in 2009.
To use Bitcoin, you choose a “wallet” specific to your device and transactional needs. Then, you can acquire Bitcoin by either accepting it as payment for something or buying a certain amount. And then you can spend it anywhere it’s accepted (soon, perhaps, even by companies like Tesla).
A blockchain is essentially a financial ledger. It pulls together information from multiple computers to come to a single conclusion about a transaction. Most importantly, this chain arrives at this conclusion securely and anonymously, which is a big reason why it’s so appealing to some users.
Cryptocurrency is virtual currency that can be passed along from peer to peer without any sort of formal administrator. It is not backed by the Federal Reserve, nor is it currently subject to any government regulation. But you can use it to buy goods and services online.
Bitcoin is one type of cryptocurrency. Other popular options include Dogecoin, Ethereum, Lightcoin, Tether, XRP, and Binance Coin. But that’s just a few of them. There are currently more than 10,000 publicly traded cryptocurrencies, with a total stock market value exceeding $2 trillion. That’s right…trillion.
Cryptography is the language by which blockchains understand transaction information and keep it secure. Essentially, it is specialized code that connects each block in a chain together. To date, cryptography has proven itself very hard–just about impossible, in fact–for hackers to breach.
In order to make new cryptocurrency coins and to keep track of all the various blockchains, massive amounts of computer power are needed to “mine” those coins and transaction info. A single custom-made mining rig requires a power supply, a motherboard, operating system to run the motherboard and a GPU (graphics processing unit).
Altogether, a rig can perform more than 25 million math equations a second. Such high energy use means that all of the above components need to be left out in the open so they don’t get too hot and burn out.
There are cryptocurrency mining companies that have cropped up to mine in this way on a grand scale. Many of these mining companies seek to set-up in states like Texas and Washington, which have been deemed friendlier to their high power and low regulation needs. Some of these operations are quite large, employing thousands of people in just one location.
Is Bitcoin Safe?
It depends on what you mean by safe. If you are an investor, and you mean safe as in a sure thing investment-wise, then no, Bitcoin is not really safe. Since it isn’t regulated, cryptocurrency has been on something of a rollercoaster on the stock market. Dramatic increases and dips don’t make for for-sure financial stability. But if volatility and excitement is your thing, then it could be fun to dive on in.
Or maybe you mean safe in terms of the security and privacy of its transactions. Then that would be a yes. If you are interested in Bitcoin as a day-to-day user, the security of the blockchain process has proven itself to be reliable and private.
(We should note that this privacy has made cryptocurrency a growing source of funding for illegal enterprises. So, the absence of regulation and oversight is not always a good thing.)
A little less confused about Bitcoin? Check them out for yourself, and see what you think.
Photo credit: Andreanicolini – www.shutterstock.com