What exactly is Bitcoin and Is It a Good Investment?

January 12, 2021 0 Comments

Bitcoin (BTC) is a new kind of electronic currency-with cryptographic keys-that is decentralized to a network of computers used by users and miners around the world and is not controlled by a single corporation or government. It is the first electronic cryptocurrency that has gained the public’s attention and is accepted by a developing number of merchants. Like other currencies, users can use the digital foreign currency to buy goods and services online as well as in some physical stores that accept it as a form of payment. Currency traders can also trade Bitcoins in Bitcoin exchanges.

There are several major differences between Bitcoin and traditional currencies (e. g. U. S. dollar):

Bitcoin does not have a centralized authority or clearing house (e. g. government, central bank, MasterCard or Visa network). The peer-to-peer payment network is managed by users and miners around the world. The currency is usually anonymously transferred directly between users through the internet without going through the clearing house. This means that transaction fees are much lower.
Bitcoin is created by way of a process called “Bitcoin mining”. Miners around the world use mining software and computers to solve complex bitcoin algorithms and to approve Bitcoin transactions. They may be awarded with transaction fees and new Bitcoins generated from resolving Bitcoin algorithms.
There is a limited quantity of Bitcoins in circulation. According to Blockchain, there were about 12. 1 mil in circulation as of Dec. 20, 2013. The difficulty to mine Bitcoins (solve algorithms) becomes harder a lot more Bitcoins are generated, and the maximum amount in circulation is capped at 21 million. The limit will not be reached until approximately the entire year 2140. This makes Bitcoins a lot more valuable as more people use them.
The public ledger called ‘Blockchain’ information all Bitcoin transactions and shows each Bitcoin owner’s respective holdings. Anyone can access the public ledger to verify transactions. This makes the digital currency more transparent and predictable. More importantly, the transparency prevents fraud and double spending from the same Bitcoins.
The digital currency can be acquired through Bitcoin mining or even Bitcoin exchanges.
The digital foreign currency is accepted by a limited quantity of merchants on the web and in some brick-and-mortar retailers.
Bitcoin wallets (similar to PayPal accounts) are used for storing Bitcoins, private keys and public details as well as for anonymously transferring Bitcoins in between users.
Bitcoins are not insured and therefore are not protected by government companies. Hence, they cannot be recovered when the secret keys are stolen by a hacker or lost to a failed hard drive, or due to the closure of a Bitcoin exchange. If the secret tips are lost, the associated Bitcoins cannot be recovered and would be out of circulation. Visit this link to have an FAQ on Bitcoins.
I believe that Bitcoin will gain more approval from the public because users can remain anonymous while buying goods and services online, transactions fees are much lower than credit card payment networks; the public ledger is accessible by anyone, which can be used to prevent fraud; the currency provide is capped at 21 mil, and the payment network is operated simply by users and miners instead of a central authority.

However , I do not believe that it is a great investment vehicle because it is extremely volatile and is not very steady.
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For example , the bitcoin price increased from around $14 to a top of $1, 200 USD this season before dropping to $632 per BTC at the time of writing.

Bitcoin surged this year because investors speculated that this currency would gain wider approval and that it would increase in price. The particular currency plunged 50% in December due to the fact BTC China (China’s largest Bitcoin operator) announced that it could no longer take new deposits due to government regulations. And according to Bloomberg, the Chinese language central bank barred financial institutions and payment companies from handling bitcoin transactions.

Bitcoin will likely gain more public acceptance over time, but its price is extremely volatile and very sensitive to news-such as government regulations plus restrictions-that could negatively impact the currency.

Therefore , I do not recommend investors to invest in Bitcoins unless these were purchased at a less than $10 UNITED STATES DOLLAR per BTC because this would allow to get a much larger margin of safety.

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