What is Bitcoin? Cryptocurrencies Explained for Beginners

What is Bitcoin?
Still struggling to understand what Bitcoin is? Have you heard the term Cryptocurrencies, Litecoin, or Ethereum in the news and had no idea what people are talking about?
 
Well, recently I went on 207, the evening news program on the NBC affiliates in Maine, to talk about Bitcoin and the other popular cryptocurrencies. Here’s that segment.
 
 
Whenever I go on TV, I try and provide the hosts with the type of questions to ask me. It makes their jobs easier and it keeps me from being surprised with a tough question on air! Here are my notes that I used to prepare for the segment.
 
So, by the end of this segment will our viewers be ready to invest in Bitcoin?
  • No! I’m not a financial advisor and my biggest takeaway for Bitcoin and cryptocurrency would be to do your own homework and due diligence before investing.
OK, let’s start with the basics. What is Bitcoin?
  • Bitcoin is one type of cryptocurrency. Cryptocurrency is a digital currency that uses encryption techniques to generate specific amounts of the currency and verify the transfer of funds. It’s usually done without a central bank or government.
  • There are many other types of cryptocurrency, including Litecoin and Ethereum. Many have unique qualities to them. Think of these as different currencies or precious metals you can invest in. Bitcoin is sort of the gold standard here, but investing in any cryptocurrency has risks, and it’s much more volatile than the stock market.
If there’s no central bank or government behind it, how is it safe?
  • There’s a technology called blockchain that encrypts all the transactions. Proponents of cryptocurrency say this makes it safer than current currencies as credit cards and cash can be stolen. 
So how do we get a Bitcoin?
  • You can “mine” for Bitcoin and other cryptocurrencies. Just like someone would mine for gold, you can contribute your computer’s processing powers and that can unlock bitcoin. However, you need a very powerful computer with a top notch graphics card to really have any  luck at it. There are videos about getting into mining and we can put them on the website.
How else, if we’re not going to mine?
  • Again, like any precious metal, currency, or real estate, there are exchanges where you can buy and sell bitcoin and other cryptocurrencies. Coinbase is a popular one.
How real is this? Is this a scam or the wave of the future?
  • Again, I’m not an investment expert. I would treat this like any other investment: due diligence. I have been doing a lot of research myself, and it does seem like there’s a possibility that some of these cryptocurrencies could take off. Already, there’s already services out there that take Bitcoin and other cryptocurrencies and make it them easier to use and spend. Imagine if Amazon decides to take a cryptocurrency as payment, or decides to create their own. 
  • It seems logical that the future of money is digital, and cryptocurrency could be the answer.
In addition, here are some resources you can include in your “show notes”

So, what do you think? Is cryptocurrency the future or is it just another Dutch tulip bulb? Will you be investing in it, or are you already?

Let me know in the comments below!

Rich Brooks
Cautious Investor