The word virtual is defined as “being such in essence or effect though not formally recognized or admitted.” Each and every day the world we live in, especially in this rapidly changing digital age, seems to move further and further away from the concrete and closer to the virtual. The recent surge in Bitcoin is, even more, evidence of the movement. If you’re like so many others and ready to jump on the Bitcoin bandwagon, make sure you understand it before you dive right in.
Bitcoin is a cryptocurrency—virtual money—that is traded with no physical backing. There is no actual currency to be handled. Despite the picture you see as the feature photo, Bitcoin is more like your imaginary friend that you created as a child, except Bitcoin actually exists, albeit only in the Bitcoin cloud. The virtual money can be sent to anyone, anywhere in the world, as long as they are a Bitcoin user.
Created by Satoshi Nakamoto in 2008, the Bitcoin software is now open to everyone, with no one person or authority having control. Much like the virtuality of Bitcoin, Nakamoto himself is shrouded in mystery. Having never been clearly identified after initiating the rules, Nakamoto more or less disappeared after releasing the software.
As if that isn’t confusing enough for you, Bitcoins are mined—not like diamonds would be mined in reality, but rather mined in a virtual system where people solve complex math problems in order to create the Bitcoins. If you’re a winner, you earn 12.5 Bitcoins. Right now that happens roughly every 10 minutes.
The next thing you need to know is that every single Bitcoin out there is tracked on the blockchain system—9,500 computers recording each and every transaction related to Bitcoin. Regardless of the tracking system that is in place, no one ever really has to relinquish their true identity. They simply open a Bitcoin address, start sending and receiving and the system tracks them based on their created address and the amounts of Bitcoins sent. This is what makes the virtual currency world enticing to criminals—the lack of oversight by a centralized power.
While there are other cryptocurrencies out there, Bitcoin seems to be the one that has become the darling of the stock market. Trading at just over 17,000 recently, with many predicting it will continue on an upward trend into 2018. However, I’d like to remind you that always is never always. No one can predict what the market will do. If you’re thinking of trading Bitcoin or some other cryptocurrency, make sure you understand what you are doing and the risk you are taking. Volatility is a major concern with these. Nonetheless, if you are still convinced Bitcoin is the way to go, then strap on your hard hat and expect a bumpy ride—you just might like the roller coaster you’re about to ride.
I hope that helps make your understanding of Bitcoin somewhat financially simple. If you have questions about it or any other cryptocurrency contact me or visit Financially Simple, our blog filled with currency and other financial topics.
Disclaimer: this is not a recommendation to purchase Bitcoin. Speak with your financial advisor before making any investing decisions.