Heard about Bitcoin yet? Thanks to its soaring rise in value, Bitcoin is the latest hot topic.  What you may not know is that Bitcoin uses the mathematical science of cryptography to work. That’s right,  Bitcoin relies on science.

Bitcoin also exists only on computers and is maintained through a complex network of millions of computers around the world.  It’s a decentralized currency, having no issuing central authority that regulates it. Each Bitcoin is a virtual entry on a giant global ledger shared between all computers, which cross-tracks every transaction ever made, so it’s almost impossible to trick the system and commit fraud.

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The cryptography (coding and decoding information) of Bitcoin comes into play during timing disputes. Because of network latency, multiple accounts can buy bitcoin at the same time. To fix this, every computer keeping track of the transaction has to solve a cryptographic hash function (a difficult problem that involves computer guessing). The computer that solves it first updates the global ledger. You can read more about it here. It is the use of cryptography that ensures Bitcoin is possible and makes it so secure.

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Back in 2009 the price of Bitcoin was basically nothing, with hundreds of Bitcoins selling for a few cents. Just eight years later Bitcoin reached over $19,000 per coin.

The truth is, Bitcoin has value because people agree that it does. It’s purely speculative. All that matters is that someone is willing to pay the asking price.

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Whether this means you should invest your money in Bitcoin is another question.  Regardless, Bitcoin is a fascinating example of how modern technology is changing the investment landscape.