Skip to Main Content

Start Of Main Content

The lowdown on Bitcoin, the instant pay currency

A rundown of the pluses and minuses of this decentralized open source currency.

Coins coming out of a tablet device

Bitcoin is a currency created in 2009, but unlike dollars, it is decentralized. Meaning, it 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 does Bitcoin work?

You can purchase bitcoins from individuals or online exchanges. The current value fluctuates, so check the price before you buy.

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. Choose 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.

What are the benefits of Bitcoin?

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.

Are there risks with Bitcoin?

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.

Disclosures

The information in this article was obtained from various sources not associated with State Farm®. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. These suggestions are not a complete list of every loss control measure. The information is not intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. Nor is it intended to effect coverage under our policy. State Farm® makes no guarantees of results from use of this information.

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.


Select a product to start a quote.




844-373-0003

Also Important

Recognize tax scams to better protect your information

Recognize tax scams to better protect your information

Common tax scams like telephone scams, phony tax preparers and phishing emails or websites can cost you.

Have the (Not-So-Scary Financial) Talk

Have the (Not-So-Scary Financial) Talk

It's all about finding the money management approach that works for you both, together.

Related Articles

Here are some additional articles that may interest you.

Break Down a Budget

Break Down a Budget

There are three types of expenses to consider when building your budget. They are: fixed, variable, and non-monthly expenses.

Make the Most of a Company Retirement Savings Match

Make the Most of a Company Retirement Savings Match

Make the Most of a Company Retirement Savings Match

You Won’t Miss Paying Credit Card Interest

You Won’t Miss Paying Credit Card Interest

You Won’t Miss Paying Credit Card Interest