iStock/Thinkstock(NEW YORK) — Many people had likely never heard of Bitcoin before 2017. The cryptocurrency then shot up in value at the end of the year and is now a top trending topic on Google and one of the most-talked about subjects when it comes to markets and economics.
Despite the discussion surrounding Bitcoin, people still struggle to describe it and understand how it can be used.
Octavio Blanco of Consumer Reports recently spoke with ABC News, discussing an article he wrote that breaks down the fundamentals of Bitcoin. He explained those fundamentals in his conversation with ABC News.
Blanco defines Bitcoin as a “virtual or crytocurrency that only exists in digital form” in a virtual wallet, which can be stored on a smartphone. Bitcoin can be used for peer-to-peer transactions, transferred between wallet without big government or bank regulation. Developed in 2009 by Satoshi Nakamoto, an unknown person who goes by that name, Bitcoin and other cryptocurrencies are still in their infancy, says Blanco. He likens Bitcoin to the Internet was growing in the 1980s, saying there is a lot of room for growth and development.
Blanco says the technology behind Bitcoin, the blockchain, or what he describes as Bitcoin’s “backbone,” has garnered much attention with Bitcoin’s rapid ascension and will continue to be important as cryptocurrencies develop. He tells ABC News it is the “digital ledger that accounts for every single transaction that’s ever occurred using Bitcoin,” tracking every exchange made with the cryptocurrency.
The reason for its popularity is that it eliminates the need for a centralized tracking system, such as a bank, redefining the ways in which people can safely make peer-to-peer transactions.
Blanco warns that blockchain technology does present its risks, however, when it comes to Bitcoin.
He says that blockchain tracks exchanges in a “pseudo anonymous” way. The transaction is recorded, but a number is assigned to the transaction rather than a name, and it is not always easy to identify who two people are that are making a transaction based on the number that it is assigned.
Blanco still stresses blockchain’s importance, however, saying, “There’s really a lot that’s going to be done with that [blockchain].”
Also, Bitcoin lacks consumer protections, so if a person were to obtain possession of a personal cell phone, they could transfer Bitcoin from the victim’s virtual wallet to their own.
Along with consumer protection risks, Blanco warns Bitcoin’s volatility makes it a risky investment and unreliable for day-to-day transactions. A person can walk into a grocery store that accepts Bitcoin, such as Whole Foods, ready to pay with the cryptocurrency, and realize its value has changed within minutes.
Blanco provides a complete breakdown of Bitcoin in his article from Consumer Reports.
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