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Bitcoin, a cryptocurrency created back in 2009, has been making headlines recently due to its spike in value and consequential surge into the mainstream. "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," says Meltem Demirors, director of development for the digital currency group, recently told Brit + Co.
As much as it's written about and discussed in the news, it's still difficult to understand as a concept. If you've ever sat at your computer wondering what Bitcoin is, you're not alone. This futuristic currency has been boggling the minds of many as of late. Here's the skinny on what Bitcoin is, why people are buying it, and what the risks are, according to Brit +Co.
What is it?
Essentially, Bitcoin is a type of cryptocurrency—think of it as a digital currency that uses cryptography for security. It's mined using computers, but it's the same idea as mining silver or gold—only electronically.
Bitcoin was created anonymously nearly a decade ago, and it wasn't widely discussed outside of the finance and tech scene until recently. Bitcoin is now worth a lot more money, which garnered some buzzworthy attention for the currency.
Why Buy It?
People can buy and sell Bitcoin for other cryptocurrencies (you may have heard of Litecoin, for example). Currently, Bitcoin is worth about $16,550, but you don't have to buy an entire Bitcoin to get in on the action. You can buy a portion of Bitcoin for as little as $10.
Now might be a great time to invest in Bitcoin, according to Demirors. This is because you can invest in Bitcoin and the software that allows it to function called blockchain. "The internet has changed the way we transfer information, and the blockchain is changing the way we transfer value," Demirors told Brit +Co. Additionally, those who invested in Bitcoin early on are seeing major returns on their investment, which bodes well for future investors.
What Are the Risks?
While the world is buzzing about Bitcoin, it's important to keep in mind the risks of investing in this type of cryptocurrency. It may be worth a lot of money now, but there's always the possibility that figure will drop. This risk is amplified by the fact that the currency is electronic, which means it can be hacked.
There are also environmental concerns regarding the way Bitcoin is mined. The process uses up to 32 terawatts of energy each year, according to Digiconomist (that's enough energy to power eight U.S. homes for a day).
Head to Brit + Co for the full story, and read about the retirement saving strategy you probably haven't considered yet (but should) next.