Bitcoin: the basics

December 8, 2017 - Posted by: admin - In category:

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You have probably heard the words “Bitcoin” and “Cryptocurrency.”  But if you are like most of us, you have at first felt a little curious, then tried to learn a little more about these things…only to eventually give up with a headache.  Let’s face it, these are complex matters well understood by few.  I recently came across a good article on bitcoin basics, written by Timothy P. Lee.  CLICK HERE TO READ THAT ARTICLE. 

In his article, Mr. Lee covers the following topics in a fairly concise manner:

  • What is bitcoin?
  • How did bitcoin become so valuable?
  • Why would someone want to use bitcoin?
  • Does bitcoin really have an aggregate value of $150 billion?
  • How can a person acquire bitcoin?
  • Is bitcoin liquid? How can you cash out of your bitcoin?
  • What is all the noise about the vast amounts of energy consumed by bitcoin mining (and what is bitcoin mining for that matter)?

These and several related matters are covered by Mr. Lee in his excellent article.  This is the first times I have read an article on cryptocurrency and the blockchain technology and come away feeling that I understood what I just read.  Perhaps its simply a matter of me being a little slow, but it may also be a reflection of the fact that there seems to be a general disconnect between those who work with cryptocurrency and blockchain matters and those who can explain such things for the average person. It’s not an inaccurate generalization to say that computer programmers and computer engineers live in a unique world and tend to communicate in a manner understood best by those who share their world (and their language).  I know, a little ironic and hypocritical coming from an attorney..:)

There is still a great deal of uncertainty surrounding the entire cryptocurrency world.  In the context of estate planning, cryptocurrency is one of the newest and perhaps most valuable (maybe) digital assets that should be considered and addressed as you are doing your planning, now and in the future.

If you are in the market for bitcoin or just want to gain a basic understanding of what all the hub-bub is about, Mr. Lee’s article is a good place to start. But before you cash out your retirement or other savings accounts and invest wholly in cryptocurrency, please be sure to consult with your financial advisor and perhaps other professionals, as putting all of your eggs into that basket may be exciting and hold the chance of significant gains–but it may also come with such high levels of volatility and risk that you will regret such a move.  As with anything of this nature, you would be wise to educate yourself as much as possible, get professional guidance to learn what you don’t know (even after internet research) and then proceed with great caution.  Being invested in “cutting edge” currency isn’t always the best option for long-term security.

Reference: “Bitcoin: Seven questions you were too embarrassed to ask” by Timothy B. Lee.  Online article dated December 2, 2017, at https://arstechnica.com/tech-policy/2017/12/bitcoin-a-beginners-guide/

 

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