Bitcoin - the new digital gold
Published 1 year ago
Bitcoin is considered to be a digital currency or cryptocurrency. You can read more about cryptocurrencies in our previous article Introduction to cryptocurrency. What are Bitcoin and Ethereum? Other opinions are that it is a digital asset like gold or real estate. There is no a strict definition of what exactly is Bitcoin and there is no final regulation from governments about this topic at least at the time of this writing. Some people are buying Bitcoins for investments because they see that its value is increasing over time. Other people are using Bitcoins as a payment method for goods and services. Others are trading it as any other commodity, stock or bond.
One fact is known for sure: The interest in the Bitcoin is greater than ever. The current price of a Bitcoin is $7500 and it's going up. Because the amount of Bitcoins is limited to 21 million it is considered a scarce asset and thus its value will rise as much as people are willing to invest in it. In other words, the more people will believe in this idea the more valuable it will become. And there is a reason for this and this reason is the technology behind the Bitcoin. This technology is Blockchain. Read more about Blockchain Technology in our previous articles but the general idea is that it is a distributed network and there is no central authority to govern the participant's actions. Meaning that the system is decentralized and the transactions happen peer to peer without the middleman in the form of a bank or a central authority. This system is based on consensus among its participants and there are protocols which you have to follow if you want to be part of this network. And this fact makes Bitcoin different from usual currency like US dollar.
Ok, why would we need a new digital currency? It gives its participants freedom to do whatever they want from the legal point of view with their funds without the need for a central authority to authorize the transaction. A central authority is not necessarily always a bad thing but we all know that some of them are corrupt and are not working in the interest of its clients. In order to get some Bitcoins only thing to do is to open a digital wallet and you can receive funds from anybody. You can even get a fraction of the Bitcoin so basically, you can buy coins even for $10 and lower. The transactions occur very fast and without any confirmation from a central authority. Nobody can block your account or make some transfers by mistake. There are no hidden fees. Yes, there are some transaction fees but they are minimal. It is a global network out of any governments control meaning that you can make transactions anywhere on the planet and the fee will be the same.
Of course with freedom comes and responsibility. Once the transaction is made there is no way to roll it back. So if you send funds by mistake it's gone. There is no central authority or helpdesk to support you in case of mistakes. Also if you lose your keys you will lose access to your funds. This means that before proceeding to use bitcoin you have to get used to electronic storage practices and security measures. We will write about creating wallets and securing them in future articles.
So Who should use bitcoin? Well, anybody can use it as an investment but I would suggest investing only a part of your available funds. I think 10-30% is a good decision but it depends on your preferences and risk management skills, it could be more it could be less than that. If you want to dive deeper you could use it also as a payment method, but in this case, you should know more about transaction fees, volatility of the market, and availability of entities which accept cryptocurrencies. You could even start trading with cryptocurrencies if you have some experience in this field. But most importantly you can start a business with the blockchain technology. This is a very hot topic right now - people are crowdfunding startups which employ this technology.
One important thing to mentions is that Bitcoin is not the only cryptocurrency in this space even though is the biggest one. With the dominance of 60% at the moment itis the leading project and first mover of the industry. But there are plenty of altcoins like Ethereum, Litecoin, Ripple, Bitcoin Cash which is a fork from the main Bitcoin network and many others rising at the moment. This makes the market more stable and opens up many opportunities for businesses who want to get involved in this industry. I believe that this is the future and I see adoption of this technology all over the place and from my poit of view there is no way to stop it.