Bitcoin is a currency created in 2009, but unlike dollars, it is decentralized, and isn't controlled by government, banks, or other persons or organizations. This open source, instant payment currency is tracked online, so anyone in the world can use it.
Bitcoin should not be confused with digital payment networks such as Apple Pay or PayPal. These networks access your debit or credit accounts, which is not historically a Bitcoin feature.
How Bitcoin works
You can store Bitcoins digitally in an app or software or print a record. Different wallets (applications on smartphones or computers) have different levels of security. Weigh your wallet.
Bitcoins may be used to purchase goods and services as long as a retailer accepts them. You can also transfer them between users.
These features distinguish Bitcoin from other currencies:
- Easy cross-currency transactions: There's no need to exchange Bitcoins for foreign money because it's universal.
- Transparency: All Bitcoin purchases are recorded in a public ledger. Therefore, there are fewer hidden fees and fewer opportunities for fraud.
- Low fees: Bitcoin operates with little to no fees. The small fees sometimes imposed support faster transactions. This is good news for small businesses who have to pay fees when customers use credit cards.
Bitcoin is unregulated and remains vulnerable to certain risks, such as:
- Hacking: The Bitcoin cryptographic code is strong, but some hackers have accessed users' online wallets. Software or paper wallets are more secure.
- Volatility: The Bitcoin market remains explosive. Because so few people use it, small transactions can greatly affect its value, making Bitcoin a riskier investment.
- Lack of security: No regulation means little chance of recovering lost or stolen money.
State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates) is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites hyperlinked from this page. State Farm has no discretion to alter, update, or control the content on the hyperlinked, third party site. Access to third party sites is at the user's own risk, is being provided for informational purposes only and is not a solicitation to buy or sell any of the products which may be referenced on such third party sites.