Bitcoin, launched in 2009, was the first of a new kind of asset called cryptocurrency, a decentralized form of digital cash that eliminates the need for traditional intermediaries like banks and governments. Bitcoin can be used as a currency or an investment.
 

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Takeaways

Bitcoin is a form of digital currency that uses blockchain technology to support transactions between users on a decentralized network.

New Bitcoins are created as part of the mining process, as a reward to people whose computer systems help validate transactions.

Buying Bitcoin exposes you to a volatile asset class. There are many pros and cons to consider about whether it's right for your portfolio.

If you decide to buy Bitcoin, you’ll need a place to store it — like a hot or cold wallet.

Bitcoin is a form of digital currency that aims to eliminate the need for central authorities such as banks or governments. Instead, Bitcoin uses blockchain technology to support peer-to-peer transactions between users on a decentralized network.

Transactions are authenticated through Bitcoin’s proof-of-work consensus mechanism, which rewards cryptocurrency miners for validating transactions.

The Securities and Exchange Commission has officially approved a spot Bitcoin ETF. Learn what that means for Bitcoin and other cryptocurrencies.

Launched in 2009 by a mysterious developer known as Satoshi Nakamoto, Bitcoin (BTC) was the first, and remains the most valuable, entrant in the emerging class of assets known as cryptocurrencies.

Each Bitcoin is a digital asset that can be stored at a cryptocurrency exchange or in a digital wallet. Each individual coin represents the value of Bitcoin’s current price, but you can also own partial shares of each coin. The smallest denomination of each Bitcoin is called a Satoshi, sharing its name with Bitcoin’s creator. Each Satoshi is equivalent to a hundred millionth of one Bitcoin, so owning fractional shares of Bitcoin is quite common.

Blockchain: Bitcoin is powered by open-source code known as blockchain, which creates a shared public history of transactions organized into "blocks" that are "chained" together to prevent tampering. This technology creates a permanent record of each transaction, and it provides a way for every Bitcoin user to operate with the same understanding of who owns what.

Private and public keys: A Bitcoin wallet contains a public key and a private key, which work together to allow the owner to initiate and digitally sign transactions. This unlocks the central function of Bitcoin — securely transferring ownership from one user to another.

Bitcoin mining: Users on the Bitcoin network verify transactions through a process known as mining, which is designed to confirm that new transactions are consistent with other transactions that have been completed in the past. This ensures that you can’t spend a Bitcoin you don’t have, or that you have previously spent.

New Bitcoins are created as part of the Bitcoin mining process, in which they are offered as a lucrative reward to people who operate computer systems that help to validate transactions. Bitcoin miners — also known as “nodes” — are the owners of high speed computers which independently confirm each transaction, and add a completed “block” of transactions to the ever-growing “chain.” The resulting blockchain is a complete, public and permanent record of every Bitcoin transaction.

Miners are then paid in Bitcoin for their efforts, which incentivizes the decentralized network to independently verify each transaction. This independent network of miners also decreases the chance for fraud or false information to be recorded, as the majority of miners need to confirm the authenticity of each block of data before it’s added to the blockchain in a process known as proof-of-work.

Buying cryptocurrency exposes you to a volatile asset class. A common rule of thumb is to devote only a small portion of a diversified portfolio to risky investments such as Bitcoin or individual stocks.

Whether or not Bitcoin is a good investment for you depends on your individual circumstances, but here are a few pros and cons of Bitcoin to consider.