Bitcoin seems to be the latest investment trend, if you are thinking of dabbling and you are not sure, here are a few points to help you weigh your options, let you know what you are in for, and help you make up your mind.
Depending on who you talk to, you would have heard so many things, ranging from inventive to disruptive to volatile but bitcoin always finds its way to the headlines. Bitcoin comes with an air of mystery, it is said that the presumed person that invented bitcoin uses a pseudonym called Satoshi Nakamoto for it.
The concept of bitcoin is not so difficult, to break it down is similar to transferring money online from one bank to the other. But unlike other currencies like dollars and pounds, bitcoin is decentralized and what this means is that it is not regulated by any financial authority like the government or central banks.
How does bitcoin work?
In the cryptocurrency world, bitcoin is the most widely used. They make use of a technology called blocked chain in the transferring of data in cyberspace. This blocked chain technology is an unconventional coding device that is used to dissolve a single code to thousands of different computers. So for instance, if your bitcoin is made from code Bdg28eoos, the technology separates the code and then stores the code separately in different computers, so if a hacker wants to gain access to your code, the hacker is in for a lot of stress because he or she has to hack all the various computers that your code was dispersed too.
This bitcoin blocked chain technology also makes use of a public ledger and they make use of thousands of computers that are known as nodes. This node helps to keep a record of coins and their respective owners. If the data of your coin is changed then the nodes will help in cross-checking to make sure that the change is legitimate and it was initiated by the owner of the coin.
Uses of bitcoin?
In case you are wondering what the benefits of bitcoin are, here are a few things to help.
When you buy your bitcoin, you can make use of them in online trades wherever they are accepted. It is important to note that when you make use of bitcoin, there is no deduction of money from your bank account, money is only deducted when you are purchasing your coin itself.
Should you invest in bitcoin?
When more people show interest in bitcoin or in buying bitcoin then the value of bitcoin increases. Today more than ever before, a large number of people are interested in buying bitcoin, whether it is as a result of the fluctuation of other currencies or whether it is as a result of missing out on the latest trend, it doesn’t matter. As a result of all this, bitcoin trading volume is increasing progressively.
Another reason bitcoin is on the rise is because of the mass adoption of bitcoin by several high-profile personnel and investment guru, and more individuals are more accepting of the decentralized nature of bitcoin.
What this entails is that buying bitcoin now comes with its advantages and disadvantages.
One of the advantages of bitcoin is that their value is global and what this means is that their value is the same in every country and this makes for easy transfer from one person to the other even in different countries and this transfer comes with no worries about the exchange rate.
A disadvantage of bitcoin has to be the volatility of bitcoin, there have been reports that isn’t that easy to get your money out, especially if there is a technological mishap or mistake, but investing in anything comes with a risk.
Bitcoin and other currencies
A major difference between bitcoin and other currencies is that you either have to hold it yourself or entrust it to a third party to hold it for you. Holding it yourself, you stand a risk of not storing it properly and you can lose your coins.
If a third party is holding it for you, they also are at risk of getting hacked and unlike other currencies, you cannot easily replace your bitcoin. Unlike other currencies, if a bank is robbed they have insurance that can cover the loss or the central bank can pay back the money but you as a customer need not worry about your money. Depending on the third party holding your coin and the agreement you have with them, they may or may not be able to cover the loss but keep in mind that it has to be an agreement and not an obligation.
But this is not to say that bitcoin has only disadvantages, one of the advantages is that bitcoin cannot be artificially inflated like other currencies, and this is an advantage because when your government prints more money, it makes the money lose its value over time. A good example of what you buy with 0.3$ may now go for 2$ and this is as a result of inflation. But unlike bitcoin, it is deflationary and what this means is that it increases in value over time, you can purchase more things with bitcoin now than you could years before. So while bitcoin comes with its own risk, it also has its advantages.
When is the perfect time to purchase bitcoin?
As with any investment, there is never a good or perfect time, throughout history bitcoin always rises and then falls, but you can make use of a chart to analyze what’s going on. Bitcoin is universal and thus is less affected by any single country’s financial situation or stability, good or bad.
There is no investment without its risk, but investing in anything should come with a lot of research as to the trends, the financial institution to engage with so that you can make the right investment options.