What is Bitcoin?

Bitcoin is both one of the hottest stories in the digital world and an emerging digital currency that many of us find hard to fully understand. On Wednesday evening, three experts painted a more complete picture of this technology at the latest Tech in Focus event at Sabey Data Center in Tukwila, Wa. They explained how Bitcoin transfers value over the Internet, creates opportunities to invest in its growing infrastructure and fuels the increasingly lucrative Bitcoin mining industry.

The panel made one thing clear: Bitcoin is in its infancy, and has barely left the maternity ward.

“We are not even at the ground floor for this technology,” Jinyoung Lee Englund, director of Public Affairs at the Bitcoin Foundation, told the audience.

Essentially, a Bitcoin is a decentralized and digital unit of value that individuals can use to pay each other directly, without a middle man such as a bank,

“With Bitcoin there is no bank to call,” said Ashok Misra, one of the three panelists, an expert on e-commerce and founder of Alina Consultants.

It is also a rapidly growing, but volatile, currency. The value of one Bitcoin jumped from $13.30 last December to $675 a year later, according to the foundation’s blog.

This growth means there are plenty of opportunities for entrepreneurs to invest in Bitcoin’s infrastructure, everything from ATMs to exchanges, Bitcoin Foundation’s Englund explained. (No one company, individual or government owns Bitcoin. The foundation was formed to promote, standardize, improve and legally protect the integrity of the technology.)

Bitcoin mining is perhaps the most well-known investment opportunity. When the mysterious Satoshi Nakamoto created Bitcoin five years ago – before he disappeared – he set up the system so that no more Bitcoins will be created after 2140, and the total amount of Bitcoins was capped at 21 million. Today, increasingly expensive and complex computing operations, known as rigs, mine about 3,600 Bitcoins a day, devouring massive amounts of power and stretching computing capacity in the process.

“Bitcoin is pushing the limits of semi-conductor processing,” said Hans Olsen, one of the panelists, a veteran semi-conducting executive and former chief executive officer of Alydian.

You don’t have to own a rig to invest in Bitcoin mining. You can buy cloud shares in an operation, for example, The New York Times reported in “Into the Bitcoin Mines.”  (This is an incredibly simple explanation of a complex industry and market. If you want to learn more check out the story.)

One of the biggest questions about Bitcoin is: What is the future of the currency?

Its rapid growth is already attracting plenty of investors. In the last quarter alone, the industry drew $30 million in venture capital funding, according to Englund. But, it is still a new technology, and Englund has advice for anyone interested in Bitcoin.

“Don’t buy more Bitcoins than you are willing to lose.”

Like many new technologies, Bitcoin is complex. If you want to learn more about it check out these articles:

• “Happy Birthday Bitcoin!” – Bitcoin Foundation Blog, 1/3/14.
• “How does Bitcoin work?” – Bitcoin.org.
• “Still Don’t Get Bitcoin? Here’s an Explanation Even a Five-Year-Old Will Understand.” — CoinDesk, 1/9/14
• “What’s the future of Bitcoin? That’s a good question.” – TechFlash, The Puget Sound Business Journal, 1/17/14.
• “Into the Bitcoin Mines.” – The New York Times, 12/21/13.

You can also watch a recording of the event on our YouTube channel with the audio recording and check out the PowerPoint: TechinFocus-Bitcoin Presentation.