Bitcoins are all the buzz. The virtual currency is riding a rollercoaster of speculation, rising exponentially in value and reaching a high of $260 this Wednesday before plummeting to $130. What’s more, the largest bitcoin exchange in the world just survived a coordinated hack attack, and bitcoin-generating malware is spreading across Europe like wildfire via Skype.
Yet despite all the sound and fury surrounding this made-up money, most people have a hard time understanding exactly what bitcoins are - and how they work. This is troubling, especially if you’re thinking of investing your own time and money in the Bitcoin phenomenon.
Starting your own bitcoin wallet isn’t necessarily a bad idea. Bitcoins aren’t tied to the fortunes of any single nation’s economy. They’re easy to exchange, and they aren’t subject to transaction fees. But you need to know a few important things before throwing your money into the volatile bitcoin market. You need to understand how the Bitcoin system works, where it succeeds, and where it’s weak.