What the Heck Is Bitcoin? Here’s Everything You Need to Know
The internet is buzzing about Bitcoin right now. A cryptocurrency that’s been around for a decade has been thrust into the mainstream, and it seems everyone is suddenly talking about it. If you’re a little lost as to what Bitcoin actually is, you’re definitely not alone. Here’s a quick primer on what Bitcoin is, why so many people want it all of a sudden, and why it’s still pretty controversial.
what is bitcoin?
Bitcoin was created by an anonymous person who goes by the name “Satoshi Nakamoto.” Nakamoto invented Bitcoin a decade ago in 2009, and Bitcoin hasn’t gotten too much attention outside of the finance and tech worlds until recently. Then this month, the price of Bitcoin skyrocketed, putting the currency on the mainstream map.
It’s kind of hard to explain Bitcoin, because it’s not exactly like anything else out there. Atlantic senior editor Derek Thompson describes it like this: “It’s a currency (like the dollar), whose owners consider it a long-term store of value (like silver), which is appreciating as if it were a faddish collectible (like a Beanie Baby), and is running on a blockchain platform, which some insist could change the future of everything from legal titles to daily payments (like internet).”
In simpler terms: Bitcoin is a type of cryptocurrency. You know how there are physical mines to dig up valuable metals like gold, silver, and copper? Cryptocurrency is also mined, but by using computers. Bitcoin are “mined” in “blocks,” and can then be sold for standard, government-created currency in countries that allow it. People can also sell or trade Bitcoin for other cryptocurrencies. Another common cryptocurrency you might come across is called Litecoin. People who mine Bitcoin can also just hold onto it and wait for the value to go up or down before selling it.
Once a person has Bitcoin or a portion of one (right now one Bitcoin is worth about $16,550, but the value tends to fluctuate), they can use it to buy things the way you would spend good old-fashioned dollars. While not every company or private seller will take Bitcoin, for those that do, you can just spend money and buy goods or services. Some retailers including Overstock.com and New Egg accept Bitcoin.
why do so many people want bitcoin now?
Bitcoin is still pretty new to the mainstream, and kind of difficult to even understand. So why does everyone now want Bitcoin? Mostly it’s because some people who invested in Bitcoin early have made a lot of money from it. Meltem Demirors, the director of Development for the Digital Currency Group, a leading Bitcoin investing company, tells Brit + Co that, “You don’t have to buy a whole Bitcoin [since one Bitcoin is really expensive]; You can buy $10 or $100 of Bitcoin, and can even auto-invest through websites like Coinbase.”
Demirors says there are a couple of reasons why so many people want to buy Bitcoin right now. “The first is more about the shift in technology that’s taking place because of the blockchain,” she says. The blockchain is the underlying software that allows Bitcoin to function. “You can invest in Bitcoin, or invest in the underlying protocol that makes Bitcoin work,” Demiros tells us. “The internet has changed the way we transfer information, and the blockchain is changing the way we transfer value.”
The second reason Bitcoin has so many people excited is based purely on the fact that some people have seen serious returns on their Bitcoin investments. “Everyone probably knows someone who has Bitcoin and might have made a lot of money,” Demiros says. “So Bitcoin has gone from being a very niche thing to something that more people know about because so much new wealth has been generated from Bitcoin.”
Demiros adds that there’s a “little bit of a mania” around Bitcoin right now, and there will be “some price correction.” And that brings us to why Bitcoin is still considered pretty controversial by critics of the cryptocurrency.
why is bitcoin so controversial?
While Bitcoin certainly has many zealous devotees, a lot of people are skeptical about Bitcoin. While a single Bitcoin is worth more than $16,000 right now, there’s no guarantee that Bitcoin will always be so valuable. One reason that Bitcoin is so volatile is because it’s electronic, and electronics can be hacked. Bitcoin can’t be stolen out of your wallet the way cash can, but hackers can steal Bitcoin by hacking platforms that allow people to buy, sell, and save Bitcoin. Beyond hacking, there are concerns that Bitcoin is yet another “bubble” that will burst, leaving people who invested a great deal of actual dollars in Bitcoin with major losses.
Further, there are some significant environmental concerns related to Bitcoin, specifically the way it’s mined. Because many computers are needed in order to mine Bitcoin, Bitcoin is typically mined in huge industrial spaces, using quite a lot of energy in the process. According to Digiconomist, Bitcoin uses up 32 terawatts of energy each year. That means each Bitcoin transaction uses enough energy to power eight US households for an entire day.
Bitcoin has been around for 10 years at this point, but most people are still only just learning what it is. While some people have made a lot of money from investing early in Bitcoin, many experts agree that the value will soon drop after having rocketed so high. There are also real concerns about the environmental impacts of such an energy-intensive currency. But it seems Bitcoin will be around for a while, so there’s still plenty of time to check it out and see if it’s something you’re comfortable buying and using.
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(Photos via Pixabay and Wikimedia Commons)