As the stock market continues to soar, the thrill of the Bitcoin is in full swing. Yet few people can explain what they are and how they work.
A Bitcoin is a form of cryptocurrency. Cryptocurrencies are lines of computer code that hold monetary value. Cryptocurrency is also referred to as digital currency. It is a form of digital money that is created by some serious number crunching and monitored by millions of computer users called miners.
Bitcoin was the first cryptocurrency ever invented by a person or group of people known as Satoshi Nakamoto in 2009. Since Bitcoin was the first cryptocurrency to exist, all digital currencies created afterwards are called Altcoins, or alternative coins. Some popular Altcoins include, Peercoin, Litecoin, Ethereum, and Feathercoin.
So, how do Bitcoins work? Bitcoins are virtual coins designed to be ‘self-contained’ for their value, making banks almost unnecessary. Once you own Bitcoins, they behave like physical gold coins: they possess value and trade just as if they were pieces of gold in your pocket. You can use your Bitcoins to purchase services and goods on the internet or you can store them away and hope that their value goes up over time.
Before owning any Bitcoin, you need somewhere to store them. That place is called a “wallet.” Rather than actually holding your bitcoin, it holds the private key that allows you to access your Bitcoin. You can think of your wallet as a bank account. Wallets can exist on your computer, smart phone, tablet, on a flash drive, or even on paper. Some of the most commonly used formats are: Electronic wallets, software wallets, online wallets, mobile wallets, hardware wallets, and paper wallets.
Some claim the safest option is a hardware wallet which you keep offline, in a secure place. That way there is no risk that your account can be hacked, your keys stolen and your Bitcoins taken away. But, if you lose the wallet, your Bitcoins disappear, unless you have created reliable backups of the keys. Others claim the least secure option is an online wallet, since the keys are held by someone else. It also happens to be the easiest to use, presenting you with a choice of safety versus convenience.
You are probably wondering whether you should invest money in Bitcoin at this point. Unfortunately, it is unclear whether Bitcoin is a fad or the currency of the future, given its volatility and un-regulated nature. Additionally, it is important to incorporate bitcoins into your estate plan to ensure that once you pass away, your bitcoins live on in the hands of the intended beneficiary.
One thing remains clear, and that is, a sound estate plan can help you protect your assets whether those assets include real estate, bank accounts, cars, gold coins or bitcoins. At OC Estate & Elder Law we help families protect all of their assets, so that their families will be taken care of, regardless of what the future financial trends may look like. Contact us today at (954) 251-0332 or firstname.lastname@example.org for your free consultation.