A beginner's guide to Bitcoin: what you need to know


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Bitcoin is - again - the word on everyone's lips. After hitting record prices in 2013, things went quiet.

But you can't keep a good speculative bubble down - until it pops, that is.

Bitcoin promises the best of two different worlds: anonymity but also complete security. Its underpinnings are a bit of techno-jargon called blockchain.

bitcoin cryptocurrency blockchain

In short, the "ledger" of who owns what doesn't sit at a central bank - or any bank at all. Instead, the records are kept simultaneously across many computers that all check in with each other. And the owners are known only by a string of unique text; the system doesn't keep a record of who is who.

Buying and selling bitcoin is simple enough: you find a marketplace (online, naturally) and swap your dollars for bitcoin.

Just don't lose your code or your computer.

Otherwise, you could be seriously out of pocket.

And then? Well, that's the thing. The value of bitcoin, like any other asset, is determined by what someone else will pay for it (which at the time of writing was $3850 for one).

And that's been a rollercoaster ride thus far.

So all you have to do is work out how to value it... which is pretty much impossible.

It pays no interest or dividends; it makes no profits. So there's no way of knowing how much someone will pay you for it 12 months or 12 years from now.

Maybe bitcoin will age like a Picasso or a bottle of Grange.

Or it'll go the way of Beanie Babies and that collection of hubcaps in the shed that you're sure will be worth something some day.

The problem is there's no way of handicapping the odds: and that's a poor way to invest.

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Scott Phillips is general manager of The Motley Fool. You can reach him at @TMFScottP on Twitter and via email.
July 19, 2017 9.12pm

Forigve the noob question please but is one Bitcoin actually worth over $3000? How is it possible to even afford one? Or how can someone pay for pizza with Bitcoins? I have heard last year or so that you can order a pizza and pay with Bitcoins but isn't that OVERPRICED?
Could you please explain further?

July 22, 2017 7.13pm

At the time I write this one bitcoin is worth $3525
It is divisible to 8 decimal places 0.00000001 bitcoin, you don't need to trade whole units,
The story a few years ago now, the first ever real world purchase with bitcoin was 1 pizza for 10,000 bitcoin. Today that's an approx $35million Pizza!