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Lately it seems hard not to overhear someone saying something about “Bitcoin”—perhaps in the news or from someone in the office at work. Bitcoin is an encrypted form of virtual money that has surged in both popularity and value over the past year. But to many, it hasn’t gotten any less confusing.

A recent study conducted by Blockchain Capital, a well-known venture capital firm that specializes in blockchain technology, found that 27 percent of millennials believe Bitcoin is more trustworthy than big banks. On top of this, 42 percent believe it’s likely most people will use Bitcoin in the next 10 years.

“Younger generations are often the indicator of the future, especially as it relates to technology,” says Spencer Bogart, Head of Research at Blockchain Capital. “Ultimately, if this survey is any indicator, Bitcoin has a bright future ahead. It has meaningfully captured the hearts and minds of younger generations and is likely to benefit from increasing awareness and conviction across all age groups.”

Before you find yourself smiling and nodding with nothing to add as your colleagues take a stance on “cryptocurrency,” we’re here to break down this booming trend.

What is Bitcoin?

Bitcoin is the first and most popular type of cryptocurrency—a fancy word for digital money that’s encrypted. Just like the dollar, euro, or yen, Bitcoin is a method to exchange value. Like these conventional currencies, Bitcoin can be exchanged electronically or digitally, the same way you use dollars to shop online or send a Venmo request to your friend.

Unlike the dollar, there’s no physical Bitcoin. The primary differentiating factor between Bitcoin and traditional currencies is that it’s decentralized, meaning, there’s no single authority (like Visa, your bank, PayPal, or the U.S. Treasury) controlling and issuing Bitcoin. Rather, this authority is distributed across a peer-to-peer network.

Just one year ago the price of one Bitcoin was around $500. (Major kudos if you bought it then.) Today, one bitcoin is $10,481.20.

How it works

Bitcoin are produced by hundreds of thousands of massive, powerful computers all over the world solving a complex mathematical problem. This production process is called “mining.” (The computers themselves are known as “nodes,” and the individuals who operate these computers are referred to as “miners.” The miners and nodes work as a huge, global peer-to-peer network to both produce Bitcoin and verify Bitcoin transactions, too.

People are buying, selling, and exchanging Bitcoin all of the time over their phones or computers. It’s the nodes’ jobs to monitor, record, and encrypt these transactions. The computers collect all Bitcoin transactions made during specific time periods and record them in a single “block”—kind of like a digital notepad. Over time, a chain of blocks (or stack of notepads) is created that contains a record of every Bitcoin transaction that has ever taken place. This chain is constantly updated, downloaded, and shared, so everyone can access it. This technology is known as “blockchain,” and it’s what makes Bitcoin work.

Wait…this doesn’t sound legal.

Bitcoin is legal…depending on how you’re using it. While your bank knows your name and address, and PayPal’s got your email, your identity is comparatively anonymous when using Bitcoin. Your Bitcoin address (an alphanumeric code), the amount of Bitcoin tied to your address, and the size of each transaction between addresses are the only pieces of information made public and recorded on the blockchain. You can create a new Bitcoin address for each transaction, making it a preferred currency for illegal money laundering or drug and weapon exchange.

If you’re using it to exchange legal goods and services, it’s perfectly legal. For example, companies like Microsoft, Expedia, and Overstock all accept Bitcoin.

“For the most part though people are buying and holding Bitcoin because they believe it will be more valuable in the future,” says John Cowgill, an Associate at Costanoa Ventures who specializes in cryptocurrency

Millennials are excited because…

Bitcoin is decentralized. You own your Bitcoin. No intermediaries or governments can freeze your assets or accounts. Bitcoin is also encrypted, ensuring the safety of your money. No one can tamper with it. It’s transparent. Anyone can access the Bitcoin blockchain network to see and verify transactions. If Bitcoin continues to gain broader adoption as a store of value like gold or method of payment like Visa, the value of Bitcoin will continue to rise.

But tread lightly, navigators

It’s not regulated by a single authority, and some argue this makes Bitcoin risky. There is a possibility that regulators could crack down on companies that buy and sell Bitcoin (though decentralization makes it practically impossible to shut down altogether). And it’s imaginary— it’s not backed by any underlying asset or economy. The value of Bitcoin is what people believe it to be. Remember, Bitcoin is really just an algorithm. You could go broke. The price of Bitcoin is volatile and unstable—what goes up quickly can also come down quickly.

And keep in mind: “Investing in Bitcoin is highly speculative and the market is largely unregulated,” says Spencer Bogart, head of research at Blockchain Capital. “Anyone considering it should be prepared to lose their entire investment.”