George keeps hearing about BitCoin and how much the price keeps going up. What gives it that value? Leo says nothing but sheer belief. BitCoin is crypto currency, which are essentially digital dollars that don't exist outside of a computer. You can't really take it and spend it at the local store unless the store takes it. But even a dollar bill isn't really anything but a fiat currency that the government says it's worth. The value of a dollar, or any other currency, changes all the time. It's fluid. So BitCoin is just an extreme version of that.
Bad news from the realm of crypto currency. According to BitCoin developers, the notion of Bitcoin is dead, as it is controlled by "Bitcoin" miners and many exchanges have gone under.
Sarah wants to know about Bitcoin. Leo says that Bitcoin is just like paper money, in that it's a "fiat currency." But the danger is that it's not backed by the US government (even though they will take it as payment). The main thing to understand is that a bitcoin wallet is the only place that bitcoin lives and if someone steals that wallet, it's over. So it should be backed it up. It's a challenge to make money with it, and it's wildly speculative. That's why Leo doesn't recommend investing in it. But it's an interesting way to pay people online.
Carl keeps hearing about Cryptocoin. Is it the modern day gold rush or a pyramid scheme? Leo says that it remains to be seen. Value is reliant on the full faith and credit of the US government. All currency is based on that faith. But Toshi Nakamoto created BitCoin, which is a digital currency. There's no government backing it. The benefit, though, is that it's anonymous. But it can also be stolen just as easily, and there is no central bank or authority. If governments start banning it, like China has, it could doom the concept and make BitCoin worthless.