What Are Bitcoins? Virtual Currency Explained (Like You're an Idiot)

At today's Senate Homeland Security Committee hearing, a lawyer for bitcoin is expected to ask Congress to "chart a safe and sane regulatory course" without limiting its economic potential.

Patrick Murck, general counsel for the Bitcoin Foundation, is expected to tell the committee that bitcoins are vital for developing economies and developing democracies. They allow users to spend money on political acts that some governments might find threatening and they let users sidestep corrupt practices and punitive taxes.

"Bitcoin can facilitate private and anonymous transactions, which are resistant to oversight and control," Murck will testify, according to released copies of his remarks. "This by no means implies that using Bitcoin can or should provide anyone immunity from the law."

Who came up with this whole idea in the first place?

It's a bit weird. Officially, bitcoins were invented by a Japanese programmer named Satoshi Nakamot, who outlined the process in an academic paper before disappearing in 2009, shortly after the first bitcoins were released.

Satoshi is widely believed to be a pseudonym and given his use of English in some of those papers, many believe he is an American.

What are bitcoins actually worth?

As of today, one bitcoin is worth $568, leading many to believe they are overvalued and the bubble is likely to burst.

The currency is extremely volatile. There's no control over how bitcoins are valued against other currencies and there are no large exchanges that can prevent manipulation and speculation.

Every time bitcoins make the news – like when Silk Road was shuttered, or when the tech investor Winklevoss twins – revealed they owned million of dollars in bitcoins, the value has wildly fluctuated.

So, if they're this invisible, virtual currency, how is it that people keep biting them?

You know what? You're an idiot.

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