The price of bitcoin has soared from $1,012 a year ago to $15,417 last week — tempting people to risk their savings to grab a piece of the riches. Regulators are reacting, but no law can protect everyone against their own bad judgment.
What’s bitcoin? Remember the little girl who, six years ago, ran up a $1,400 bill on her mother’s iPhone, buying smurberries on the Smurfs’ Village video game? The Smurfs are not real, and the smurberries weren’t real.
Bitcoin is like that. It’s something you buy on the Internet — and it stays on the Internet, protected by a complex code (bitcoin buyers are anonymous, so if you lose the code, you lose your coin). With that code, you can sell your bitcoin, or watch it gain (or lose) in value. Who’s in charge of bitcoin?
Nobody: a decentralized algorithm maintains it.
The algorithm is supposed to keep the total number worldwide limited, so each coin maintains its value. But competing fake coins, like litecoin and ethereum, call this theory into question.
Notice a word that is missing in this definition: currency. Bitcoin’s supporters call it that. The people at Bitcoin.com say that “what gives a bitcoin value is a combination of utility as a currency and the fact that people desire and want to own them.”