Bitcoin is getting traction in recent years because of its wide popularity with investors. Its promising features, adding to the fact that its value has risen considerably high in the last few years has earned it fame. Even common people without a background in trading have heard of Bitcoin, among other cryptocurrencies, in one way or another. This article will serve as your complete guide to knowing what Bitcoin is and why or why not it’s a good investment.
Bitcoin is a cryptocurrency, or a digital currency, for clearer description. A cryptocurrency is a virtual or digital money that is decentralized, meaning that its value is not controlled by any government or central bank. The main factors that drive up the value of Bitcoin is demand and supply. More and more investors are purchasing newly-released Bitcoins because of its increasing value in the market.
Bitcoin can be considered as an online version of fiat currency. It has many uses, including purchasing products and paying for services. It only exists online and has no physical form. The Bitcoin logo or coin that circulates online is no more than a depiction of the digital currency. Technically, Bitcoin is only a string of private codes that cannot be tracked or copied by another software. This is also one of the reasons why it has value.
This cryptocurrency is the first of its kind, being founded in 2009 by Satoshi Nakamoto, the pseudonym of an unknown programmer/s who created it. Bitcoin was started by Nakamoto as a “Peer-to-Peer Electronic Cash System” and posted to a cryptography mailing list. Nakamoto mined the genesis block of Bitcoin, which rewarded him with 50 of the digital currency. Other programmers followed suit, and were rewarded with Bitcoins by Nakamoto after they mined blocks. Thus began the slow rise of the virtual currency.
How Does Bitcoin Work?
The first Bitcoins were acquired through mining blocks. This is still performed by many programmers worldwide, only the reward is only a fraction of 1 BTC due to the increasing difficulty mining it. It would take a series of successful Bitcoin mining to acquire 1 BTC, and can only be done with powerful hardwares. Some programmers invest time and thousands of dollars in hardwares just to be able to mine Bitcoins, and even then it could take years before the programmer acquires 1BTC and probably spent more money in hardware and electricity than the Bitcoin is worth.
After a Bitcoin is mined, it is transferred to the blockchain, a public ledger that records all Bitcoin transactions. All purchases and sales of Bitcoin are also recorded on the blockchain. It can be viewed by the public but cannot be altered by anyone. The blockchain also makes it possible to spot false Bitcoin transactions, such as users stealing other’s Bitcoins and using them for unverified transactions. In this case, the transaction can be reversed, thanks to the public record in blockchain. This public ledger also makes it impossible to duplicate the private keys of one Bitcoin, which means that users are guaranteed to have full ownership of their digital coins, unless stolen from their cryptocurrency wallets.
There are a lot of cryptocurrency wallets offered by different brokers. Users have the option to use an online wallet or a software version. Bitcoins are simply encrypted computer files stored in crypto wallets, which also means that the crypto owner must ensure that its wallet is safe and secure. It is most recommended that users opt for a software or offline wallet instead of an online version, since the latter is more susceptible to cyber theft.
How Does Bitcoin Have Value?
Bitcoin has value mainly because there is demand for it. The supply of Bitcoins is also limited, with fewer and fewer newly generated Bitcoins every year. This and the fact that more traders are investing in cryptocurrencies, mainly Bitcoin, are what drives its value. Moreover, the fact that people are willing to exchange Bitcoins for goods, services, and even fiat currencies make this crypto valuable. In the early days of this cryptocurrency, it retained value mainly because people gave value to it, much like gold and diamond, and because it had limited supply.
One of the clear advantages of Bitcoin is that it is decentralized, which means that its value is not controlled by government or private entities. Bitcoin is only maintained through the blockchain, which as stated above, is accessible to the public. Furthermore, the rising popularity of digital currencies in a society going cashless is undeniable. More and more people are resorting to using online banking for their daily transactions, making Bitcoin and other virtual currencies more valuable in years to come. In early January 2021, Bitcoin had a value of $34,000.
How Can I Get Bitcoins?
There are a number of ways of acquiring Bitcoins, including purchase, sale, exchange, and mining. The main way of acquiring a Bitcoin is to buy it with fiat currency through cryptocurrency exchanges. Other traders sell their Bitcoins in exchange for fiat currencies, while others choose to exchange their Bitcoin for other cryptocurrencies, which is of course, measured in their values in fiat currency. 1 BTC could get you several Ethereums, which is valued a little over $1,000 per coin.
The last means of acquiring Bitcoins is through mining, which as stated above, takes powerful hardwares and good programmers. It is safe to say that not everybody has this option for acquiring Bitcoins.
Is it Safe to Invest in Bitcoin?
Whether it is safe to invest in Bitcoin or not, the answer would rely on your brokerage account. Cryptocurrency trading is offered by many brokers all around the world, so that gives traders unlimited options.
To ensure that your Bitcoin investment is safe, make sure to check the background of the broker you’ve opened an account with. Several exchanges have lost thousands of Bitcoins in the past, and were hardly recovered.
The second step to ensuring the safety of your investment is choosing a secure cryptocurrency wallet. Also, you must not give the private keys to your wallet to anyone, lest it will be stolen from you. Treat your crypto wallet like your bank account. Once you lose your coins, there is no guarantee that you will get them back.