first_imgThe subject of Bitcoin pops up on occasion when you’re dealing with technology. The virtual currency is gaining traction with the computer-savvy crowd, but is still mostly unknown to the general public. You’ve probably heard that Bitcoins are worth a ton when converted to “real” currencies, but how much do you really know about how Bitcoin works? If only there was a handy 3 minute video to explain it…Bitcoin mining, as explained in the video, used to be a simple process when the currency was getting underway a few years ago. You could contribute a fairly small number of CPU cycles and end up with some Bitcoins. As more miners started searching for their digital fortunes, it has become harder to make substantial amounts without multiple PCs cranking away 24-7. This is because Bitcoins, as you’re now aware, are limited in supply by design.This is a totally new way to think about money — there are no central banks, no complicated monetary policy, and no slips of paper floating around. This might be why the US government doesn’t even consider Bitcoins to be a real currency yet.When the financial crisis in Cyprus closed banks on the small Mediterranean island several weeks ago, Bitcoin was seen as a refuge. With the regular banking system closed, Bitcoins were in high demand. That’s a symptom of the main problem with this virtual money (something only briefly touched on in the video). It’s incredibly volatile.The price of a single Bitcoin bounces around between $100 and $200 on an almost daily basis (it used to be much less). Because it appeals so much to tech-savvy individuals, it has been the target of repeated hacks. Bitcoins can be stolen, and exchanges that trade in the currency can be compromised. Every time a malicious group gets in the news for swiping some coins, the value of Bitcoin plummets. It’s hard to trust vital purchases to a currency you can’t know the value of in advance.Now that you know a little more about how Bitcoin works, maybe you’ll be more apt to get in on the boom. Of course, if the concept sounds crazy, you’ll probably just steer clear.last_img

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