Anyone who's read up on basic principles of investing knows the golden rule for making any investment portfolio work over the long term: diversification. When you invest in multiple types of assets, with multiple levels of associated risk, you spread your risk out and reduce the possibility for any one investment to crash the value of your portfolio disproportionately. You also increase your chances of finding a better-than-average return, and through rebalancing, you can adjust your portfolio to reflect your current risk and return goals as they develop.

Typical assets in the past have included stocks, bonds, index funds, and real estate, but with the rise of cryptocurrencies--especially Bitcoin--more investors and professionals are turning to new frontiers in their portfolios.

So is it a good idea to diversify your portfolio with a cryptocurrency?

In a nutshell, cryptocurrencies are electronic cash systems that rely on peer-to-peer exchanges. They're fully decentralized and have no central authority or central server to manage those transactions. Instead, they rely on a network of individual computers to recognize, validate, and record transaction data; every device on the network needs to agree that a transaction can be verified, and once it is, it's added to a permanent, unalterable ledger that exists on that network--as a new "block" on the chain of data (otherwise called the blockchain). Other than their method of exchange, cryptocurrencies function just like other currencies, rising and falling in value.