A Beginner's Guide to Bitcoin

09/21/2017 02:05 pm ET

It’s possible that in the last few years, you’ve stumbled across a person or company that uses bitcoin. But what is it? Bitcoin is an emerging encrypted form of digital money, or cryptocurrency, that’s growing in popularity and value internationally. 

Started in 2009, bitcoin is attractive to users and investors because of its immediacy, lack of oversight and anonymity. The only identifier of a bitcoin account is the wallet ID - no names, emails, zip codes or even IP addresses. It can be translated into US dollars either digitally or at bitcoin exchanges around the world. 

Bitcoin doesn’t have a supervising body so transactions have no one to review them, no guidelines. Since it’s encrypted, it opens the possibilities for lots of people to interact on the international market with digital money. The upside to that is immediate transfers, no waiting period, and no fees. This is a large selling point for international businesses but, and this is the down side, that's also a draw for lesser legitimate operations like narcotics and arms dealers. 

As bitcoin has gained popularity around the world, investors started funding and trading with companies operating in bitcoin and has since created a bitcoin marketplace, much like the stock market. Bitcoin values rise and fall by the minute and participants are trading values constantly in attempts to maximize their profits. 

The lack of regulation also includes protection, however, which was exposed when one of the largest bitcoin exchanges in the world in South Korea was hacked and compromised over $1B.

I'm far from a finance expert but history shows us that bubbles burst. Before those bubbles burst, a handful of people can make a lot of money but they all eventually burst. The bitcoin bubble is no different. A lot of the hype around it is people recognizing that the bubble will eventually burst, but trying to capitalize on it before it does. While I'm personally more conservative financially, I see the potential in operating in bitcoin. Regardless of my personal feelings about it, the market cap is $137B today and just passed a significant threshold where 1 bitcoin equals over $4,000 USD. 

The future of bit coin remains in question. With so much money changing hands every day it's only a matter of time before the government gets its hands involved. China has already banned some uses of bitcoin and, as of today according to the BBC, all bitcoin exchanges in Shanghai and Beijing must submit plans by September 20 to begin closing their doors. Government oversight will likely effect many of the features that make bitcoin popular. 

The other side of the bitcoin is that it becomes regulated and is so readily available that it becomes a new part of our society. Being that banks currently have transfer periods, fees and personal data on the account holder anyway, for the average person this won't be any different than their average banking experience. A lot hinges on how much of bitcoin can stay true to its current form with the presence of oversight. 

Participation in bitcoin, like most financial decisions, is a matter of your risk tolerance. I don't recommend you get involved in bitcoin as a way to get rich quick, but if you’re already comfortable in the financial space, for now, it appears bitcoin is definitely worth a thorough look. 

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