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For his or her trouble, the miner currently gets Note that the amount of awarded bitcoins decreases over time. Ultimately, the value of a bitcoin is determined by what people will pay for it.
In this way, there's a similarity to how stocks are priced. The protocol established by Satoshi Nakamoto dictates that only 21 million bitcoins can ever be mined -- about 12 million have been mined so far -- so there is a limited supply, like with gold and other precious metals, but no real intrinsic value.
There are numerous mathematical and economic theories about why Nakamoto chose the number 21 million. This makes bitcoin different from stocks, which usually have some relationship to a company's actual or potential earnings. Without a government or central authority at the helm, controlling supply, "value" is totally open to interpretation.
This process of "price discovery," the primary driver of volatility in bitcoin's price, also invites speculation don't mortgage your house to buy bitcoin and manipulation hence the recent talk of tulips and bubbles. Bitcoin has made Satoshi Nakamoto a billionaire many times over, at least on paper. It's minted plenty of millionaires among the technological pioneers, investors and early bitcoin miners. If you're willing to assume the risk associated with owning bitcoin, there is an increasing number of digital currency exchanges like Coinmama, CEX, Kraken and Coinbase -- the largest and most established of them -- where you can buy, sell and store bitcoins.
Getting started is about as complicated as setting up a Paypal account. With Coinbase, for example, you can use your bank or Paypal account to make a deposit into a virtual wallet, of which there are many to choose from.
Once your account is funded, which usually takes a few days, you can then exchange traditional currency for bitcoin. You can sell it. Or you can just hang on to it.
Note that there are no inherent transaction fees with bitcoin, although exchanges like Coinbase typically charge a fee when you buy or sell. Short, qualified answer: Yes, for now, as long as -- like any currency -- you don't do illegal things with it. For instance, bitcoin was the sole currency accepted on Silk Road, the Dark Web marketplace for drugs and other illicit goods and services that was shuttered by the FBI in Since then, bitcoin has largely evaded regulation and law enforcement in the US, although it's under increased scrutiny as it attracts more mainstream attention.
Legal and regulatory hazards aside, as both an investment and currency, bitcoin is very risky. When you wake up in the morning, you know pretty precisely how much a dollar can buy.
The financial value of a bitcoin, however, is highly volatile and may swing widely from day to day and even hour to hour.
Exhibit A: December Bitcoin transactions cannot be traced back individuals -- they are secured but also obscured through the use of public and private encryption keys. This anonymity can be appealing, especially with companies and marketers increasingly tracking our every purchase, but it also comes with drawbacks. Theft is also a risk.
There are few avenues for pursuing refunds, challenging a transaction or recovering such losses. Once a transaction hits the blockchain, it's final. Because bitcoin is so new and decentralized, there is plenty of murkiness and many unknowns.
Even the technical rules for mining are still evolving and up for debate. The IRS views bitcoins as property, not currency. Even Coinbase, the most established of them all has struggled to keep up with demand, plagued by site outages, scaling issues and customer service complaints. Even if it's venture-backed, every bitcoin player today is by definition a startup and comes with all of the associated risks.
In August , different sects within the bitcoin mining community had a disagreement about the rules governing the mining process -- specifically, what constitutes the appropriate size in megabytes of a block. Unable to form a consensus, there was a fork in the blockchain , with the bitcoin originalists going one way and the group favoring larger blocks going another to start Bitcoin Cash. Though they share a common digital ancestry, each now has its own individual blockchain with slightly different protocols.
Forking is almost assured to happen again in the future. More than a thousand , with more sprouting up every day. Aside from bitcoin, which is the real progenitor of them all, other well-known alternative currencies include Ethereum, Ripple and Litecoin. We take a look at the pros and cons of each, and how they stack up, in this explainer. Buying and selling bitcoin : A quick and dirty introduction to trading cryptocurrency.
Bitcoin, Ethereum or Litecoin : Which is best for you? Be respectful, keep it civil and stay on topic. We delete comments that violate our policy , which we encourage you to read. Discussion threads can be closed at any time at our discretion. What is bitcoin? Here's everything you need to know Blockchains, bubbles and the future of money.
Justin Jaffe. It's been a wild ride. Coinbase You heard about this bitcoin thing? Science Picture Co We're guessing: yes, you have.
But first: A quick backstory Bitcoin was invented in by a person or group who called himself Satoshi Nakamoto. Corporate Finance. Your Money. Personal Finance. Your Practice.
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What is Market Capitalization Market capitalization refers to the total dollar market value of a company's outstanding shares of stock. Key Takeaways Market capitalization refers to how much a company is worth as determined by the stock market. It is defined as the total market value of all outstanding shares. To calculate a company's market cap, multiply the number of outstanding shares by the current market value of one share.
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