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Everyone's talking about it, but what exactly is Bitcoin?

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As the recent volatile market shows, short-term results for crypto as well as other investments don't guarantee continuous market gains.

Bitcoin has skyrocketed in popularity since its inception, but it is still causing people to scratch their heads when it comes to actually using it.

Bitcoin is a digital currency that is a peer-to-peer technology that Bradley Baerwaldt, owner of QC Bitcoin Standard, calls “digital gold.” Bitcoin specifically has a fixed supply of 21 million, which makes inflation a constant, he said.

Purchasing bitcoin can be done on apps like Robinhood, Paypal and even Cash App. Here in the Quad Cities, it can also be purchased from machines. In Davenport, there are multiple locations that include the Kwik Star and Shell gas stations.

After the financial crisis of 2008, the federal government issued massive bailouts that pushed more money into the economy to prevent a further collapse. Bitcoin was introduced in 2009 as a way for people to send money over the internet without central control from a bank.

“Just think of bitcoin as a savings account,” Baerwaldt said. “Bitcoin is a place to put money in hopes that it will appreciate due to the limited supply.”

In the short term, bitcoin may not be valuable to some. But in the long term, its value grows substantially, he said, because of its short supply.

The simplest way to understand bitcoin is to understand that one coin equals one coin, the same way 100 pennies is equal to $1, Baerwaldt said. A common misconception of bitcoin is that it has to be purchased as a whole.

Allen McCain, Baerwaldt’s business partner, said it could be purchased little by little, known as satoshis. The price of bitcoin fluctuates, but Tuesday morning, one bitcoin was equal to $21,075, making it inaccessible for most consumers, but for $10, one could purchase thousands of satoshis.

The satoshis work like pieces of a pie. The bitcoin represents the whole pie, but that may be too expensive for most. If a person wants to purchase just a piece of the pie, they can. In this case, that would be the satoshi. It takes 100 million satoshi to make up a bitcoin, which is why purchasing small amounts can add up over time.

“Adding small amounts of bitcoin to your portfolio weekly through dollar cost averaging adds up over time,” Baerwaldt said.

Once that bitcoin has been purchased, spending it is not as complicated as it sounds, Baerwaldt said. Because it acts like an extra savings account, he uses the analogy that it works like gold. Although gold has a value in dollars, it is not the typical currency used to purchase groceries, for example.

As technology has evolved, bitcoin has emerged bas a way to purchase goods and services. Bitcoin exchanges will instantly convert from its value to dollar value if a consumer uses it to buy a coffee, for example.

Just as a consumer would use a wallet to hold cash, bitcoin users have digital wallets; usually in the form of apps. Software and USB drives are also a way to store it.

The way bitcoin is kept and spent could evolve in the future, as cryptocurrency as a whole is in the early stages of the adoption process. Much as people were not sure the Internet would take off, bitcoin is in that same position, Baerwaldt said, which is why learning about it now is essential.

“Money really has no value unless it is trusted by the people,” he said. “Money is controlled by the people, and if people lose trust, they go to an alternate source. This is where bitcoin is hanging out in the shadows.”


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