What exactly is Bitcoin and Is It a Good Investment?

Bitcoin (BTC) is a new kind of electronic currency-with cryptographic keys-that is decentralized to a network of computers used by users and miners around the world and is not controlled by a single firm or government. It is the first digital cryptocurrency that has gained the public’s attention and is accepted by an expanding number of merchants. Like other currencies, users can use the digital currency to buy goods and services online as well as in some physical stores that accept this as a form of payment. Currency investors can also trade Bitcoins in Bitcoin exchanges.

There are several major differences among Bitcoin and traditional currencies (e. g. U. S. dollar):

Bitcoin does not have a centralized authority or even clearing house (e. g. government, central bank, MasterCard or Visa network). The peer-to-peer payment system is managed by users plus miners around the world. The currency is definitely anonymously transferred directly between customers through the internet without going through a clearing house. This means that transaction charges are much lower.
Bitcoin is created through a process called “Bitcoin mining”. Miners around the world use mining software plus computers to solve complex bitcoin algorithms and to approve Bitcoin transactions. These are awarded with transaction fees and new Bitcoins generated from solving Bitcoin algorithms.
There is a limited amount of Bitcoins in circulation. According to Blockchain, there were about 12. 1 million in circulation as of Dec. 20, 2013. The difficulty to mine Bitcoins (solve algorithms) becomes harder a lot more Bitcoins are generated, and the optimum amount in circulation is capped at 21 million. The limit will not be reached until approximately the year 2140. This makes Bitcoins more valuable as more people use them.
A public ledger called ‘Blockchain’ records all Bitcoin transactions and shows each Bitcoin owner’s respective holdings. Anyone can access the public ledger to verify transactions.
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This the actual digital currency more transparent plus predictable. More importantly, the transparency stops fraud and double spending of the same Bitcoins.
The digital foreign currency can be acquired through Bitcoin mining or even Bitcoin exchanges.
The digital currency is accepted by a limited number of merchants on the web and in some brick-and-mortar retailers.
Bitcoin wallets (similar to PayPal accounts) are used for storing Bitcoins, private keys and public addresses as well as for anonymously transferring Bitcoins between users.
Bitcoins are not insured and therefore are not protected by government companies. Hence, they cannot be recovered if the secret keys are stolen with a hacker or lost to a failed hard drive, or due to the closure of the Bitcoin exchange. If the secret secrets are lost, the associated Bitcoins cannot be recovered and would be away from circulation. Visit this link for an FAQ on Bitcoins.
I believe that Bitcoin will gain more acceptance from the public because users can remain anonymous while buying services and goods online, transactions fees are much lower than credit card payment networks; the public ledger is accessible by anyone, which can be used to prevent fraud; the currency provide is capped at 21 million, and the payment network is operated by users and miners instead of a central authority.

However , I do not believe that it is a great investment vehicle because it is extremely volatile and is not very steady. For example , the bitcoin price increased from around $14 to a top of $1, 200 USD this year before dropping to $632 for each BTC at the time of writing.

Bitcoin increased this year because investors speculated that this currency would gain wider approval and that it would increase in price. The particular currency plunged 50% in December because BTC China (China’s largest Bitcoin operator) announced that it could no longer acknowledge new deposits due to government rules. And according to Bloomberg, the Chinese language central bank barred financial institutions and payment companies from handling bitcoin transactions.

Bitcoin will likely gain more public acceptance over time, but its price is extremely volatile and very sensitive in order to news-such as government regulations and restrictions-that could negatively impact the currency.