What is Bitcoin?
Bitcoin is a global digital currency based on distributed computing instead of gold and banks. At the time of this writing, Bitcoin is the world's largest digital currency by market capitalization (market cap), meaning that its total market value is greater than that of any of digital currency.
Bitcoin has offered traders and investors some promising returns, including when its price climbed more than 1,000% in 2017. (Retrieved 14 May 2019 - Coindesk) At the same time, traders must keep in mind that this digital currency is highly volatile and has suffered sharp declines at some points.
Bitcoin also provides opportunities for diversification, as market research shows Bitcoin has repeatedly displayed a low correlation to other asset classes. (Retrieved 14 May 2019 - PDF Link) In other words, Bitcoin prices don't generally follow the fluctuations associated with other asset classes such as stocks and bonds.
As a result, traders and investors can potentially reduce portfolio volatility through Bitcoin.
Bitcoin is decentralised, which means it's not issued or controlled by any central bank. Its transactions are recorded on a blockchain, which is a distributed ledger system that is both spread across many devices and also immutable. The transactions recorded on this blockchain are available to the public.
These features are meant to safeguard against fraud. Every transaction is recorded on the blockchain, so its information is there for interested parties to see.
Also, because no central entity controls Bitcoin, it could potentially continue to exist even if the governments of the world chose to ban the digital currency.
Bitcoin is digital, so it's only available in electronic form. This feature makes Bitcoin very difficult to counterfeit, unlike units of fiat currency. Theoretically, a group of miners could obtain control of 51% of the Bitcoin Network's hashing (or processing) power, which would allow nefarious parties to potentially double-spend their bitcoins and even reverse transactions.
However, obtaining this much processing power would be prohibitively difficult, and this helps keep the Bitcoin Network secure.
Bitcoin can be used in many places. This can make the digital currency particularly helpful in areas that are suffering from capital controls or hyperinflation.