Bitcoin is an online alternative currency system, which acts as a form of digital money. Bitcoin is used both as an investment, and as a method of payment for goods and services, and is touted as a means to do so without needing to involve any third parties. Despite their growing popularity, most businesses still do not accept Bitcoin, and their usefulness as an investment is both highly questionable and potentially risky. Before proceeding to buy Bitcoin, it is important to understand what it is, and its advantages and disadvantages.

Bitcoin is a completely virtual currency, that allows consumers a way to exchange money for free, without the use of a third party (like a bank, credit card company, or other financial institution). Bitcoin are not regulated or controlled by a central authority like the Federal Reserve and all Bitcoin transactions take place in an online marketplace, where users are anonymous and untraceable for the most part.

To understand Bitcoin, it is important to understand Bitcoin mining, which is the process by which Bitcoin are created. While mining is complex, the basic idea is that each time a Bitcoin transaction is made between two people, the transaction is logged digitally by computers in a transaction log that describes all the details of the transaction (like the time, and who owns how many Bitcoins).[3]
These transactions are then shared publicly into something known as a "block chain", which states every transaction, and who owns every bitcoin.
Bitcoin miners are individuals who own computers that constantly verify the block chain to ensure it is correct and up to date. They are the individuals that confirm transactions, and in exchange for doing so, they are paid in bitcoin, which increases the supply.
Since Bitcoin is not overseen by a central authority, mining ensures that the individual transferring the bitcoin has enough, that the agreed upon amount is transferred, and that the balance for each member of the transaction is correct afterwards.