What is Bitcoin? A digital currency primer
A different type of ATM is popping up all over the Lehigh Valley one focused on a currency that no one can physically hold in their hands. They’re Bitcoin ATMs. Bitcoin is one type of cryptocurrency that’s been around for more than a decade, but has garnered recent attention as its worth skyrocketed over the past several weeks.
Here’s what you need to know about Bitcoin:
What is Bitcoin?
It’s one type of digital currency, also called cryptocurrency. Other examples include Terra, Solana and Dogecoin; there are more than 5,000 cryptocurrencies in circulation.
Bitcoin was created in 2008 by Satoshi Nakamoto. We don’t know if Nakamoto is one person or a group of people, as they’ve remained anonymous.
Nakamoto published ideas for the currency here.
Can I hold a physical coin?
Nope. It’s all digital. The graphics you see newspapers or other media outlets use with stories on cryptocurrency are illustrations.
How does it work?
Basically, a Bitcoin is a piece of computer code transferred from person to person. It isn’t tied to a bank or government, allowing users to spend it anonymously at any time. Bitcoins can be bought and sold on exchanges with U.S. dollars and other currencies, or they can be “mined” through users verifying transactions.
Bitcoins are saved in a password-protected digital wallet. If users forget their password, the wallets can end up being locked forever. though services are popping up to help recover passwords.
Does anything back it up?
Not physically, no. But, every transaction is recorded in a blockchain, a public ledger that everyone has access to.
Who uses it?
In the past, it was used by hackers to demand ransom and for the purchase of illegal drugs online. More recently, it’s become popular with speculative investors.
There have been cases of fraud linked to cryptocurrency.
in February, an Australian man pleaded guilty to securities fraud in Manhattan federal court after prosecutors said he cheated investors of over $90 million by squandering money they spent on his cryptocurrency fund. In November, a Colorado man pleaded guilty in what New Jersey authorities said was a $722 million cryptocurrency mining scheme.
Where can I use it?
Many major retailers still don’t accept cryptocurrency as a form of payment. However, that’s slowly changing.
PayPal has begun to allow their users to buy, hold and sell cryptocurrencies. Microsoft has been accepting Bitcoin for its online Xbox Store since 2014, and Overstock.com accepts it, too.
What’s the point?
One idea behind cryptocurrency is to decentralize the world’s monetary systems to create a more even playing field.
Bitcoin is also finite, with only 21 million ever going to be available. Because more Bitcoin can’t just be printed or created, it guards against inflation.
Because it’s not tied to a bank or government, transaction fees are lower than a traditional checking or savings account, too.
How much is Bitcoin worth?
The value of cryptocurrencies has been fluctuating, but Bitcoin has been getting more and more attention, especially after Tesla, the electric car company run by Elon Musk, in February said that it had bought $1.5 billion of Bitcoin and would begin accepting it as payments.
Bitcoin was worth $43,770.89 on Sunday, down from a peak of $54,911.13 Feb. 22, according to Coindesk, a website that monitors the price.
What do US officials have to say about it?
U.S. Treasury Secretary Janet Yellen on Monday warned investors of the risks of Bitcoin during the DealBook DC Policy Project, calling it “an extremely inefficient way of conducting transactions.”
“To the extent it is used, I fear it’s often for illicit finance,” Yellen said. “It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer.”