If you’ve been in the business or financial scene for a considerable amount of time, you may have heard of Bitcoin. Like a lot of people that might be new to the concept of Bitcoin and cryptocurrencies, you might be confused as to what exactly they do and why they matter in markets in the first place. When a friend or a peer says you ought to “invest” in Bitcoin, it’s natural to be confused. Fret not, as this article will walk you through what you need to know about Bitcoin and if it’s right for your investing needs.
What Is Bitcoin? Revolutionizing the Ledger
Perhaps before you begin investing in Bitcoin, it might help to understand what it actually is. Bitcoin is a type of cryptocurrency, which means it’s a type of encrypted “currency,” that has skyrocketed to popularity a few years back. It’s a digital recreation of the ledger, as in a record of transactions. Bitcoin’s nature as a secure and independent “ledger” allows it to be used as a currency.
Bitcoin and cryptocurrencies belong to a large group of items known as a blockchain. In essence, it’s a ledger that can’t be altered, is decentralized, and is completely digital. Here are some facts to help you understand these concepts fully:
- A ledger is simply a type of record that keeps all histories of ownership and transactions of an object. If you have a bank account, its history is in itself a ledger. It’s an account of who owns what and what’s given to who. The ledgers in modern society are usually handled by a central authority, such as a bank. Given ledgers of this nature can be altered, ledger recorders such as banks have a lot of power with the kind of transactions individuals hold. When used for malicious purposes, accounts can be manipulated.
- A digital ledger means the ledger isn’t physical but digital. This means your ledger can only be accessed through digital means, and therefore no one can “physically” hold it. All members of the blockchain have a copy of the entire blockchain and all of its transactions.
- Being decentralized means there’s no “central” authority to control your ledgers either. Transactions in blockchains are called “blocks” that have to be “agreed” upon by all members of the blockchain before being official. “Agreeing” comes in the form of cryptic puzzles that “miners” have to solve in order to validate transactions. Miners are individuals who “break” various mathematical puzzles using their computers to validate transactions in exchange for something in return – cryptocurrencies.
- Being independent, especially since everyone has to “agree” on transactions, means no one “owns” the ledger. More importantly, given everyone has a copy of the ledger at any given time, there’s no way to make alterations in the ledger without everyone knowing. This makes the system completely safe and independent.
Hence, blockchains actually have several uses, such as in real estate, healthcare, lending, personal data, and smart contracts. Those who want to depend on a digital and secure source of finances may want to start investing in blockchain, particularly Bitcoin.
The Magic of Bitcoin: Will It Work for You?
If you are intrigued with the nature of Bitcoin and how it works, you might also be curious about how trading with it – or even investing in it – actually works. Sites such as The Coin Offering actually give users real-time views on how Bitcoin and other cryptocurrencies “interact” with other currencies in the real-time market. This can be extremely useful, especially for those who want to be in the loop as to how these currencies affect the more popular money we use in the real world. Here are some of the things you have to know before investing in Bitcoin:
- Do you think Bitcoin can be a long-term trusted store of value?
One of the most crucial decisions you have to make is to decide if you think Bitcoin will actually be something worth investing in the long term. For this to happen, the price of Bitcoin should be around $2,000,000, which is 100 times more than the price of Bitcoins in circulation today. If it turns out that Bitcoin is not a trusted store of value in the long term, then its price will likely be zero. Bitcoin is in a tricky spot, as none of the above is currently. However, if you believe that Bitcoin has a 10% chance of being a trusted store of value in the long term, then it might be worth risking.
- Do you believe Bitcoin is an extremely valuable commodity?
A lot of things in the world are valuable because of different reasons. Some of these things are assigned value, like money or gold or paintings. If you think you should invest in Bitcoin, you ought to think about the people working with Bitcoin.
Its creator, Satoshi Nakamoto, is an extremely unknown figure – no one knows if this is a person or a group. Nakamoto just created Bitcoin to create a decentralized commodity that is safe and secure. Nakamoto’s “following” consisted of people who understood this necessity and are most likely rich individuals who are media savvy, connected, and good with public relations. If any of these individuals are people you admire and trust, then you should invest in Bitcoin like them.
- How much risk are you willing to take with Bitcoin?
Given that Bitcoin and other cryptocurrencies are still new in the market, why not study how people interact with it first? If Bitcoin “evaporates” in the market, then a lot of people who invested in it will likely lose a ton of money. If you can bear the downside of Bitcoin “evaporating,” then invest in it. However, don’t just go rushing to Bitcoin hoping for a big win immediately.
- Can you handle dealing with exchanges that aren’t regulated yet?
A lot of firms are trying to build exchanges using cryptocurrencies, which can attract a lot of individuals. However, remember that not a lot of them are even regulated by the SEC yet. If you want to get into the blockchain space, Bitcoin is a good place to start. However, invest in this only if you’re willing to take the gamble in the possibility that the blockchain industry might not be successful in the future.
- Can you also have access to your own Bitcoin and blockchain?
One of the most important considerations in investing in Bitcoin is if you want to be on the sidelines or a major player. The former means just investing in Bitcoin without owning some, which is feasible. The other is to actually participate in Bitcoin exchanges and own a few Bitcoins yourself. This allows you to be involved in the action and own the currency in question. If you want to be involved with how Bitcoin functions in the market, your investment should be built around acquiring crypto yourself.
The Bottom Line: Bitcoin for Investment
It’s important to remember that Bitcoin and other cryptocurrencies remain popular because of the many things it can do for the security oriented. After all, why rely on a third party when you have a form of commodity that in itself is independent, is totally secure, and depends on everyone to make everything work out? The nature of cryptocurrencies is a radical departure from the current market, but this is exactly what makes people so intrigued and interested in investing in it. Taking the above into consideration, do make endeavors with Bitcoin with caution and careful planning to make the most of your ventures.