Bitcoin is a decentralized digital currency (cryptocurrency). It is not controlled or regulated by a government or central bank and doesn’t need a middleman like a bank to transfer between users. Bitcoin has been the trendsetter and most well-known cryptocurrency, but others include Litecoin, Ethereum, etc. While they all work slightly different and use varying mathematical models they all fall under the cryptocurrency label. New Bitcoin is produced by a process called mining, where you use computational power that gets more difficult by transaction and requires more power. Computational power means using more energy and more powerful computers to solve ever evolving complex algorithms. This is the beauty of the system – there is a law of diminishing returns that keeps Bitcoin supply from blowing out of proportion. If you mine, buy or trade something for Bitcoin you keep it in a digital wallet for storage. Another brilliant idea to come out of Bitcoin is that it uses an anonymous public ledger called a blockchain. This allows verification of the transaction without manipulation because if you edit one transaction you would have to edit them all, which means the whole network would have to be in collusion. The idea of blockchain is also being introduced into other markets where it can serve as an excellent source of tracking and preservation for medical records, record management or food traceability.

Should you invest in Bitcoin? I don’t directly invest in currencies, and with Bitcoin at its base being a currency I don’t invest in it either. Currencies are very volatile and have too many outside influences to dictate their price. Even though cryptocurrencies are trying to solve this problem by being decentralized, we still have seen events like cyber hacks, insider trading and even threats of potential regulation that have caused a dramatic swing in price. The benefit of being disassociated with a government or regulating body also produces the risk of fraudulent activity because these are the pools that criminals want to play in.  I do believe that cryptocurrencies will have an important and impactful part in the future, but like the dotcom era, the mania is just a little too intense for me. If anyone is going to invest, my advice is to diversify in the idea and don’t get caught up in a single company or product.