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Current:

BTC High $249.00 Low $193.81 Last $249.00
LYC High $5.00 Low $4.18 Last $4.81

For those who don't know what Bitcoin is, let me explain. But before that, to those snarks who will say "You missed the boat!" (even though it's DOUBLED since then!!) I will say this, I have talked to two people in the last three days who have substantial investments (one greater than a Mill) who both said "What?" when I mentioned Bitcoin.

Bitcoin is virtual "computer money". It gets created at a fixed rate (well, somewhat fixed.) The current number of Bitcoins out there are about 11,000,000.
When all bitcoins are created, there will be about 21,000,000. This is due to happen about the year 2140.

So what is special about Bitcoins?
Bitcoins are worth zero. Maybe, bitcoins are worth a billion dollars. It's up to the people who buy/sell/trade bitcoins how much they are worth. So in a sense, it is a true free market economy. It cannot be artificially inflated/deflated by the amount of Bitcoins in circulation, or any such thing as an "interest rate" that attaches to the Bitcoin.

Who says how many Bitcoins you have?
Nobody.
Bitcoins are contained in a "Wallet", a computer file that lives on your computer. Nobody else has access to that info unless you give them a copy of your "wallet" file. The security amounts to multi-level hashing security, and it would take literally millions of years of supercomputer time to un-encode your wallet.
So how do transactions happen?
A simple client interface you can run on your home PC allows you to buy/sell/trade Bitcoins. A growing number of vendors accept Bitcoins as payment for merchandise. When you start the Bitcoin interface on your machine, it verifies the contents of your wallet, and synchronises your local copy of the Bitcoin Database with the database out on the net. Any Bitcoin transaction you do is automatically pumped out to eight (if not more) other nodes of people who use bitcoin. ALL transactions are verified across the node pool, along with all the other encryption security benefits.

Can Bitcoin be hacked?
Yes.
Will it drastically affect the value of Bitcoins?
Maybe. But I tend to think not. The reason being the encryption. Even though it was announced over the weekend they had been hacked, it was a DDOS attack, and AFAIK, no accounts were pilfered. Bitcoin is unlike any other centralized, brokered account in history. You Bitcoins EXIST IN YOUR WALLET, NOT on some database at a bank or money market firm, etc. There exists no centralized place, no focus, that has a database that says you have X bitcoins.

Can I lose money with Bitcoins?
Many will. Many people right now are saying Bitcoin is in a massive bubble. But they are worth what PEOPLE decide they are worth, not what the governments and banks try to decide. So in a sense, it is truly free market, because as long as no one can hack and decode the Bitcoin transactions and database chain, there is no way to steal or counterfeit Bitcoins.

Are you saying there are no problems with Bitcoins?
No.
The database for Bitcoins is large, and growing every day. Currently, at around 7 Gigabytes, you need to have it downloaded before you can start. After you have downloaded it, the Bitcoin program will run, but if you shut off your machine for a while, you will have to download the additional blocks of data.
Earlier today I turn off one of my machines running Bitcoin for about 6 hours, and when I restarted it, it took about an hour for it to get synchronized again.
For desktop type users, the download times can be a pain.
For mobile users, the size of the DB is going to be daunting.
So it is easy to see that Bitcoin might lose value if a more efficient and even more secure way of handling the DB is developed.
If you think even a tiny bit you might like to invest in Bitcoin, you need to be prepared to follow the developments closely.