Think about just how often you make a transaction online. It can be on Ebay, or Amazon, or even through a mobile game like Candy Crush Saga. When you buy the entire first season of Game of Thrones on Amazon, or buy more lives in Candy Crush Saga, a microtransaction may occur where the app or website automatically withdraws the proper payment with your provided credit or credit card info. Paypal can also be used in these cases to complete the transactions.

This medium of payment is far from unusual these days; in a world where Ebay and Amazon are the new Target and Walmart, the ability to pay for things online can be essential for many. On a daily basis, Paypal transactions tend to value about $397 million, according to Business Insider. That’s almost half a billion dollars of U.S. currency networked across an online system, every single day.

At the end of the day, however, any transaction made with Paypal (or almost any transaction online for that matter) is still rooted in U.S. currency. If you bought a new purse online for $49.99 plus shipping, you’d have comparable results if you were to buy the same product in-person at Macy’s for the same price.

Now, the way we make transactions online may be changing. A new form of currency, the cryptocurrency, continues to make waves every day as it becomes more prominent in the global economy. The bitcoin, a cryptocurrency which first surfaced in 2009, is currently worth more than $200 from its starting point of just a few dollars. Compared to Paypal, Bitcoin transactions, which number 80,000 per day, are valued at around $257 million. Again, that’s valued in U.S. currency – except there’s one problem.

Bitcoin is only tied to U.S. currency in the same way stocks are; stocks can be purchased with U.S. dollars, rise or fall in value based on supply and demand, and they can be resold on the stock market – again for cold cash. Bitcoin works the exact same way: it can currently be bought for $233.03 (as of February 23rd, 2015) and can be resold online based on its rising (or falling) price. And it does fluctuate regularly; just a few weeks ago, bitcoin prices were at over $300.

So where’s the discrepancy? If Bitcoin is so similar to what we already have today, then what’s notable about it?

Bitcoin is not an ownership share in a company or corporation based in U.S. dollars, like Stocks are. Bitcoin is its own distinct currency.

Think about currency exchanges in foreign countries. Buying bitcoin works almost the same way, except for two notable differences: firstly, the exchange for bitcoins is restricted to the online monetary market. Secondly, the bitcoin exchange is not government sanctioned in any way, nor does it have centralization within one department. In fact, the question of Bitcoin’s legality often comes under fire.

Bitcoin in Relation to American Currency

As important as bitcoin’s similarities are to stocks, the side-by-side comparison of bitcoin to the American dollar also deserves some inspection.

Both currencies are reasonably or absolutely finite. As examined by this article, there’s only so much of American money to go around, as the Federal Reserve only holds so much. According to CoinDesk, Bitcoin in finite in a different way: only 21 million bitcoins will ever be able to be “mined,” or discovered to be legitimate, regardless of the worth or value of the currency. On the other hand, U.S. currency can be printed and minted at will, and has been continuously for over two centuries – but that doesn’t mean our currency is infinite.

But the buck doesn’t end there. The U.S. dollar and the bitcoin can be further divided into smaller currencies. Most people are already familiar with the sub-denominations of the dollar – the quarter, the dime, and so forth. The bitcoin goes even further and can be broken down into one-hundred billionths of a single bitcoin. These ludicrously miniscule divisions are known as a “Satoshi,” named after Bitcoin founder Satoshi Nakomoto. Take the 21 million bitcoins that we’ll ever have, and multiply it by 100 million. That’s a lot of Satoshis.

The real question, however, lies in the matter of bitcoin’s worth. That is, just who or what decides that a bitcoin is worth the amount that it is? Priced at $233.03 as of February 23rd, 2015, Bitcoins on the market today are worth more than some AAA-company stocks. But why?

Remember that bitcoin is decentralized – there is no single base of operations for the bitcoin exchange, unlike the U.S.’s Federal Reserve. There is no National Bitcoin Bank to control the flow of bitcoin transactions. As such, no single institution could possibly claim value of the bitcoins.

As a result of the lack of centralization, the network of bitcoin mining and transactions is run entirely by an open community available to everyone. But the problem of worth still lies herein; how could couch dwellers and computer programmers decide that a single bitcoin is worth more than two hundred dollars?

This is where we find the most striking similarity between bitcoins and U.S. dollars.

Both currencies are what’s known as fiat money – money that only has value because the issuer, usually a government, says it does. If you look closely enough, most modern currencies work this way, especially the U.S. dollar. The U.S. government states that one dollar, printed or otherwise, is worth exactly one dollar, and the people consent to its worth.

Bitcoin works the same way, except with a bit more fluidity. Its declared value can depend on a variety of factors – public perception based on current events, consumer confidence, rising supply, fluctuating demand, and many others. All of those factors can also apply to stocks; a press release from a Fortune 500 company (or any other public company, for that matter) can result in the price of their stocks rising or falling. News articles on Bitcoin, be it positive or negative against the cryptocurrency, can have the same effect.

Bitcoin’s Legality (Or Lack Thereof)

2006 saw the peak of E-Gold, an online currency based in physical gold backed by Gold & Silver Reserve Inc. Founded in 1996 by Barry Downey and Douglas Jackson, the project rose to mass utilization within five years. It worked very similarly to how Bitcoin works today – it allowed for the instant transfer of ownership of gold, all on an online platform. Come 2009, legal issues forced the service down…by hands of the U.S. government. As summarized by the company’s website, “By agreement with relevant authorities including the U.S. Department of Justice, e-gold has suspended all e-metal Spend activity subject to meeting certain licensing requirements.” The licensing agreements involved stem from the Patriot Act, as it states that one cannot operate a monetary transmitting business without the proper licenses in their state to do so.

E-gold and Bitcoin are so similar to each other that one cannot help but wonder if Bitcoin will meet the same fate as E-gold. Bitcoin is, after all, a money transmitter in line with the Patriot Act’s classifications. And it surely doesn’t have the proper licenses required by the Act.

But even if Bitcoin could be shut down, there’s almost nothing for the government to shut down, unlike E-gold. All operations involving the currency are operated by supercomputers all over the world by investors in the currency, as opposed to a single point of centrality. These supercomputers “mine” their own bitcoins and reap in the rewards with no outside help from a Bitcoin office or website. In fact, it’s not even entirely clear if Satoshi Nakomoto, creator of the Bitcoin, is real or simply a pseudonym.

As a result of the lack of centrality, Bitcoin’s transaction history is both anonymous and public. Rather than registering a username with a large Bitcoin domain, each end of a bitcoin transaction is shrouded in a random address in order to protect user confidence. At the same time, a blockchain, the log of every bitcoin transaction ever made, is always available to the public. So even though nobody can know you bought a hotel reservation with bitcoin, the blockchain will reveal that somebody did.

That’s not to say that bitcoin’s anonymity can save it. Mt. Gox, one of the leading online bitcoin dispensaries, processed 70% of all bitcoin transactions before it was shut down in February of 2014. Not long before that, Russia declared Bitcoin and all similar cryptocurrencies illegal under their present laws. According to a statement from Russia’s Federal Security Service and Interior Ministry, its central bank, “Russia’s official currency is the ruble. The introduction of other currencies and the issue of money surrogates are banned.”

Back at home, however, the issue of Bitcoin’s potential shutdown is blurred within a grey line. In October of 2013, the FBI arrested Ross William Ulbricht on charges of money laundering and drug trafficking. The money he had laundered? Only about four million dollars’ worth of bitcoins.

Ulbricht operated the Silk Road, an online black market operation funded partially by bitcoin. Now, after other uses of bitcoin for illegal market operations have been unfolded, many are wondering whether or not Bitcoin can be legal.

According to Article I of the U.S. Constitution, only the federal government is granted the right “to coin money…and regulate the Value thereof.” A report from the Congressional Research Service explored the topic of its legality further, citing several federal and state laws that both supported and denied any illegality. One such law is the Federal Campaign Act, which embraced the use of bitcoin by allowing for “a nonconnected political committee to accept Bitcoin contributions and to purchase Bitcoins as an investment.” This law applies to public elections and the political parties that campaign in them; they can use bitcoin to aid their campaigns. The same report, however, also points to the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” The complaint filed against Butterfly Labs of Wyoming by the FTC accused Butterfly Labs of “[misleading] consumers who paid for Bitcoin mining machines and services that the company sold on the Internet.” Their assets were later frozen and seized by the FTC.

Granted, not all bitcoin transactions are sued for illegal ops. In fact, state laws in New York and California are paving the roadwork for greater, more widespread use of bitcoin transactions. A proposal in New York would allow for license and regulation of cryprocurrency operations. And California has not only supported the use of bitcoin, but a bill signed by Gov. Brown in 2014 repeals the provision that outlawed any currency other than U.S. currency.

In light of incidents such as the Silk Road shutdown, the use of bitcoin in illegal transactions for purchasing illegal goods certainly brings Bitcoin, and other cryptocurrencies, into a harsh negative light. An article by reason.com, however, points out that as much as 23% of reportable U.S. income might not be properly reported to the IRS. According to economist Edward Feige, it’s more than likely that the money isn’t being hoarded, but rather used as fuel toward a “shadow economy” – a black market.

Now, if so much of our U.S. currency goes toward drugs and weapons, why should bitcoin used in this case be any different? Of course, dealing in the black market is morally wrong no matter how you pay, but why ban bitcoin for using it the same way American money can be used?

Grounds in the Online Market

Ever since launching in 2009, Bitcoin has risen and fallen drastically in value. More and more bitcoins are being “mined” every day and shared into the decentralized market. Even online travel agency Expedia began accepting bitcoin as payment last year. But as a widely-used currency, can it ever hold full ground against other payment methods?

Remember that there is a finite supply of 21 million bitcoins that will ever exist. As each “blockchain” is mined, 25 bitcoins are given out to the miner who has “discovered” the block. However, as analyzed by Dorit Ron and Adi Shamir, that number will half itself in mid-2016 to 12.5 bitcoins per blockchain. By the year 2140, when the number of allotted bitcoins has halfed itself numerous times, the 21 million bitcoins will be depleted altogether. Though the mining process will still continue thereafter (as a blockchain merely consists of all public bitcoin transactions), the “prize” for discovering a blockchain will consist only of any transaction fees tied to that blockchain.

Even when you forget about the finite supply of bitcoin, the lack of stability in value is a cause of worry for many. The first winner of Reddit’s “Millionaire Makers” contest, in which a random user is chosen to receive lottery-style winning from other users, received a third of his winnings in cryptocurrency – about one whole bitcoin. That’s nothing to scoff at; one single bitcoin was worth more than $300 at the time he won.

“The volatility is what worries me the most about Bitcoin and always has,” writes the winner, who goes by the Reddit username Emphursis. “As an example, when I won, Bitcoin was 1btc = $377, now 1btc = $220, that’s a huge difference. I spent .5btc a few days after winning (about $185 at the time) on a monitor. That .5btc is now worth $110, a huge difference and unless the place I bought the monitor from ‘cashed out’ straight away, they’ve made a pretty big loss.”

Emphrusis’ testimony also brings about the issue of bitcoin’s fluidity and its impact on the market. As the bitcoin changes in value, x amount of bitcoin previously spent can deplete to only be worth half of its original value. As Emphursis described, it’s like spending retail price on a computer monitor or gaming system, only for half of that money spent to mysteriously disappear. Except, of course, it doesn’t just disappear.

“Until [Bitcoin] gets to a point at which it is stable,” Emphursis continued, “I don’t think it will be widely accepted and it won’t be a truly viable alternative to hard currency.”

Achieving stability might not sound too hard, you think, but think again. This chart featured on fool.com demonstrates just how unstable bitcoin’s growth or decay can be in a period of just two days. And those prices are based off of November 2013 values. Nowadays, you’d be lucky to see it valued above half the values in that chart.

For some, investing in bitcoin may bring you mountains of wealth, or can deplete you of hundreds of dollars by day’s end. If you do decide to invest in the cryptocurrency, however, by all means you should research and acknowledge the risks.

Because, for most, they outweigh the benefits.