What Is Bitcoin, Anyway?
Bitcoin, the world’s most popular digital currency, has been on a tear in 2016, up 32% since the markets bottomed in mid-January. But what is bitcoin? Should investors jump on board?
Before you start investing in bitcoins and counting your profits, it’s important to know what you’re getting yourself into—just like you would with any currency or equity.
What Is Bitcoin?
What is bitcoin, anyway? Bitcoin is a decentralized, digital currency that is created, held, and used electronically. Unlike a traditional, fiat currency, bitcoin is not controlled by anyone, nor is it issued or backed by a central bank.
Bitcoin is sort of like the Wild West of currencies; it is decentralized and unregulated by a central bank. Instead, bitcoins are produced by people and businesses on computers around the world using software that solves a complex mathematical equation.
Because bitcoins are an independent, global currency, they cannot be manipulated. New bitcoins are minted every day but there is a limit to the number that can be created. This helps prevent inflation, but not speculation, hence the investor appeal.
Bitcoins are unlike the U.S. dollar, which the Federal Reserve can print off at will.