Breaking Bitcoin down for beginners

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Breaking Bitcoin down for beginners

Danielle Breslow

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Stories about Bitcoin have been booming recently, as has the Bitcoin business, but there are still many common misconceptions about what this intangible currency actually is. Bitcoin is a type of electronic money, otherwise known as a cryptocurrency. It has a decentralized payment network, so no one person has control of the currency. People who use Bitcoin make transactions without a third party processing the money; the payment goes directly from the sender to the recipient.

When Bitcoin was created in 2009 by an anonymous person with the alias Satoshi Nakamoto, a single coin was worth next to nothing. That changed in 2017 when the value of Bitcoin increased by more than 1,200 percent. Currently, one Bitcoin costs around $11,000 (this estimate fluctuates everyday). However, Bitcoins are divisible by up to eight decimal places, meaning those who don’t have an extra $11,000 to spend can still invest.

Junior Garrett Cashion invested $200 in Bitcoin at the beginning of this school year. Since then, Cashion has made around $800, but explains that in order for that money to go directly into his bank account, he first has to sell the coin. Unfortunately for Cashion, he sold all of his percentage of a Bitcoin “way too early,” and when the price of Bitcoin skyrocketed he  “missed out on a big payday.”

Initially, Cashion decided to invest because he got a job over the summer and “didn’t want that money to sit in the bank account.”

Senior Youssef Hisham invested in Bitcoin in 2015 for a different reason: to use it as a currency to buy things. Hisham remembers purchasing around 2.5 Bitcoins for $320. Like Cashion, Hisham seems to have missed out on on his big payday too. “The recent price hikes in Bitcoin definitely make me regret spending the amount of Bitcoin I did back then,” Hisham says.

Wilson alum Amir Barnett started investing in Bitcoin in 2017, after his brother encouraged him to. Barnett would not share how much he invested in Bitcoin but says that his investments were very profitable. “I would highly encourage researching how cryptocurrency works and all the potential currencies you could invest in before buying,” he says.

Though Bitcoin has the most name recognition, there are a handful of other, cheaper cryptocurrencies including Ethereum and Litecoin.

Junior Tobias Severin invested in both Ethereum and Litecoin in late August, steering away from Bitcoin because it was a “risky investment.” Severin invested $150 in Ethereum and $150 in Litecoin. His Ethereum investment is now valued at $600 and Litecoin at $543. Like Hisham, Severin has used his cryptocurrency as a form of payment. Both Barnett and Cashion have also invested in Ethereum, and Hisham invested in Litecoin.

In addition to simply buying Bitcoins, people can mine for them. This is a much more complicated process that requires complex computer software that, once it solves challenging mathematical equations, will reward the miner in Bitcoins. However, as more and more Bitcoins are being mined, the equations have become harder to break down and as a result produce fewer Bitcoins. Once 21 million Bitcoins exist, no more will be created. As of December 2017, there are 16.78 million Bitcoins in circulation.

Barnett says he started investing in Ethereum after discovering mining. “I had to download an app on my desktop computer and then just set it up. Then just keep my computer running for a very long time,” he says. “It was a very exciting process.”

Cryptocurrencies can be stored through digital wallets. A popular app that Cashion, Barnett, and Severin use is Coinbase. According to Barnett, selling coins on Coinbase is a straightforward process.

Barnett is still waiting to sell his coins. “I’ll have to see what the market ends up doing over the next month or two.” •