Bitcoin is a type of cryptocurrency which is very well known all over the world. Whenever we think about cryptocurrency, the first word that our mind thinks is “Bitcoin”.
How has it grown so rapidly over the years and should you consider investing in bitcoins or any other cryptocurrency?
We will look at all the answers to these questions soon. First, let’s understand what it is exactly and how it works.
FACT: Just 1 Bitcoin is currently trading in the market at $10301.10 or Rs.7, 57,496.54, or €8698.30. (as of 11th Sept 2020).
It is a type of cryptocurrency that was launched in the year 2009. It is claimed to be created by Satoshi Nakamoto.
But, the person is yet unknown and no one has personally claimed to have made it.
The identity of the person is unknown but still, the bitcoin has grown tremendously in these 12 years. Bitcoin is not controlled by the government.
The advantage of bitcoin is that it promises to provide low transaction fees unlike traditional online payments like credit cards which are regulated by the government or banks.
Bitcoin is created, distributed, stored with the use of a decentralised ledger system which is known as “Blockchain”. Blockchain is the core of bitcoin. It means that the third party that is involved while you send money online is eliminated.
Blockchain can be understood as simply a set of blocks where each block consists of a collection of transactions. All the computers that run this blockchain can see the transactions and thus it is very difficult to cheat the system.
However, this leads to some disadvantages like the use of bitcoin by drug dealers and on the dark web.
Bitcoin mining is a process by which bitcoins are brought into circulation.
Mining bitcoin is tough as it requires us to solve some computationally difficult puzzles to discover new blocks and also high technology hardware and software is required on your computer in order to mine.
The miners get a certain reward for mining bitcoin. This reward keeps reducing as more and more bitcoins are being mined.
The reward for mining was 50 bitcoins in 2009 and the reward as of 2020 is around 6.25 bitcoins.
The total limit on the number of bitcoins that can ever exist is only 21 million. As of Jan 2020, around 18.15 million bitcoins have already been produced.
Bitcoin has become very popular and has come a long way from the year it was launched.
Bitcoins are now used widely and can be spent in many ways like in the Xbox store, booking hotels, buying pizzas, etc.
Not everyone accepts bitcoin payment, but its use is rapidly increasing and many are starting to accept payment in the form of bitcoins.
Bitcoin may be considered as a good investment for the long term and you can invest in it to diversify your portfolio which should consist of savings, stocks, bonds, cryptocurrencies so that you cut down your overall risk.
But don’t consider investing for the short term. There may be wild fluctuations in the short term, but a minimum of 2-4 years can work pretty well.
The value of bitcoin depends mainly on the faith of the investors, public interest in using it, and its performance related to other cryptocurrencies.
If the demand for bitcoins exceeds the rate at which it can be produced, the price will increase. As of January 2020, almost 86.42% of bitcoins have already been produced.
Bitcoin is attracting many people to cryptocurrencies and forces us to consider investing in it. However, as in every case, you should understand where you are investing and should not invest blindly.
It is not guaranteed that the price will keep on going up. It depends upon its popularity and also its performance relative to other cryptocurrencies as there are thousands of other cryptocurrencies in circulation.
Check out other cryptocurrencies like Ethereum, Litecoin, PI Network, etc.
There are pros and cons to every investment. Do some basic research so that you increase the odds of profiting in your favor.
Bitcoin and other cryptocurrencies can be a great investment if the concept of cryptocurrency is applied in the coming future.
We can’t predict the future, but the least we can do is understand the concept and do our homework so that we stay in the game and understand any changes that might take place in the field of cryptocurrency.
If at all you are convinced and believe in this, stay invested for the long term only. The results will show only if you stay invested in it for a long time.