In this times we are living in, you’d have to be living under a rock to have never heard of cryptocurrencies or the major digital asset that is Bitcoin. It’s all over our tv shows, films, and spread across every news outlet in the world.
Bitcoin is the world’s largest cryptocurrency, paving the way for all others to innovate and revolutionize the industry. But what is Bitcoin and how do cryptocurrencies work? At CoinCollecting.ws we have the complete lowdown on Bitcoin, its distinct advantages, and why Bitcoin will continue to be a popular investment opportunity in the years to come.
What are cryptocurrencies?
Cryptocurrencies act as a digital form of currency that is secured using advanced cryptology – hence the name – and is near-impossible to counterfeit or forge. Think of cryptocurrencies as virtual money that’s value is free from government inflation and control. The goal of any cryptocurrency is to provide a decentralized form of currency that operates outside the boundaries of the traditional banking system.
Cryptocurrencies leverage blockchain technology – an ingenious distributed ledger that spans many networks and is irrefutable. In theory, cryptocurrencies are impregnable and entirely free from government manipulation, unlike forex. In 2021, there are upwards of 10,000 different cryptocurrencies with many of them tradable on exchanges and brokerage platforms. Cryptocurrencies are traded in much the same way as forex buying and selling as a pair. These digital assets can be bought and sold using other cryptocurrencies or many major FIAT currencies like USD, GBP, EUR, and AUD.
Are cryptocurrencies real money?
Technically, cryptocurrencies are not considered to be a legal currency in the global market. Rather they are a financial asset or property. However, many industries have adopted cryptocurrencies as a form of tender such as online casinos, merchants, restaurants and for a time even Tesla electric cars could be purchased using Bitcoin.
Therefore, cryptocurrencies are ultimately a store-of-value and as a tool for the development of digital applications in a growing industry known as Decentralized Finance – or deFi for short. However, that adoption by businesses to accept cryptocurrencies means the digital assets are a form of money in a practical sense.
What is Bitcoin?
Created in 2009, Bitcoin is the very first cryptocurrency and was born out of a mysterious whitepaper that proposed a digital form of currency that provided lower transaction fees than traditional payment systems and would be entirely decentralized.
As a cryptocurrency, there are no physical tokens and instead, all transactions are stored on the blockchain ledger. Transactions are verified through a process known as mining – a task that requires immense computer power to process and solve high-end cryptography puzzles. The security of bitcoin is derived from its blockchain. In order to achieve any sort of successful attack, one would need to operate 51% of the total computing power of bitcoin – with 11,300 full nodes as of September 2021, that task is essentially impossible.
Bitcoin acts as a means for cross-border transactions and has had great success as a means for business in nations without access to traditional banks to conduct business abroad. This is achieved via a Peer-to-Peer network and as of September 2021 there are more than 21 million bitcoins in circulation, each valued in the tens of thousands.
Advantage and Disadvantages of Bitcoin
Like anything else, be it stocks, forex, or property management, Bitcoin has its advantages and disadvantages too. We could probably dedicate a whole article to the benefits and shortcomings of Bitcoin but for now, here are the key pros and cons of Bitcoin.
Bitcoin offers immense levels of liquidity, is an excellent way to diversify your portfolio and has consistently been argued as a hedge against inflation. The world’s largest cryptocurrency ticks all the boxes for a hedge against inflation as a store of wealth. That being great accessibility, developing scarcity owing to a reduced reward in mining, and the ever-increasing demand driving its value.
Bitcoin transactions are also incredibly fast – when you use Bitcoin to make online casino deposits and withdrawals, transactions are often instant. The cost of international transactions is incredibly low, arguably negligible and can be sent anywhere on the internet. This makes Bitcoin an ideal choice for international business, as there are many additional fees and taxes that can be avoided when compared to traditional international payment methods.
As has been proven over the years, Bitcoin is highly volatile and is prone to significant highs and lows. At the start of 2021, Bitcoin skyrocketed to a mammoth value of $60,000 before plummeting to $30,000 within a month of reaching that all-time high. Since then, the value of bitcoin has gone up and down until October 2021 where the value reached above $50,000 once again.
Cryptocurrencies, and therefore Bitcoin, are entirely unregulated. Some exchanges that allow them to be traded are regulated and offer some protection but if your crypto wallet was to be stolen, you would have little means of recourse. There is also no such thing as a refund in the world of Bitcoin. All transactions are final and if a mistake is made, you may have no way of getting that money back.
The Future of Bitcoin
Bitcoin has developed into a usable form of currency and has paved the way for many other cryptocurrencies to follow suit. While not legal tender in any nation other than El Salvador – the country that adopted bitcoin as a means to solve economic issues – many businesses and industries around the world accept bitcoin like any other major FIAT currency. Sign up to any online casino in the world and you’ll likely be able to fund your account using Bitcoin. Many merchants such as Microsoft and Subway now accept Bitcoin as a form of payment, with more adding to the list each day.
All eyes are on El Salvador to see if the adoption of Bitcoin as legal tender may be a suitable strategy to end the economic woes of many developing and struggling nations such as Paraguay, Panama, and Venezuela. Bitcoin has also weathered several storms including environmental issues relating to its mining process and severe crackdowns in China that eventually lead to the banning of cryptocurrencies in the Asian nation.
With Canada launching the first Bitcoin ETFs in February 2021 and a gradual institutional adoption in the US underway, Bitcoin may very well be paving the way for cryptocurrencies to be classified as a legitimate asset class.
In 2021, there are fewer trading opportunities making the news and enticing retail investors than Bitcoin. It has found significant popularity in social media circles through endorsement by business moguls, musicians, and influencers alike. Bitcoin was the world’s first cryptocurrency and, in 2021, is still the world’s largest market share.
The digital asset continues to be a significant store of value as its demand soars and the wider financial market moves ever closer to adopting cryptocurrencies as a legitimate financial asset class. Each year, more businesses accept the token as a form of payment and this year saw the first-ever adoption of Bitcoin as legal tender in a nation.
What is Bitcoin? FAQ
💰 What is Bitcoin Cash?
Considering the popularity, value, and success of Bitcoin as the world’s largest cryptocurrency, there were always going to be imitators or variations of the original concept. There are a few variations to Bitcoin that follow a similar design and premise but aim to solve a different issue facing investors and businesses. Bitcoin Cash is one such variation known as a “fork” of Bitcoin.
📱 How to buy Bitcoin?
Bitcoin, like almost any other cryptocurrency, can be bought like any other asset. There are several ways in which an individual investor can buy and own bitcoin in 2021. How one chooses to buy bitcoin will depend on their investment goals, local jurisdiction laws, and accepted level of risk. Buying bitcoin is very simple and traders will have no problem finding apps that can ensure safe Bitcoin trading.
🔒 Is Bitcoin safe?
All tradable financial assets have an inherent level of risk associated and any asset, no matter the strength, has the potential to reduce in value for any number of reasons. There are ways to trade bitcoin while reducing as much risk as possible. As a digital asset, security features are highly advanced and, to date, Bitcoin has proven to be unhackable. A trader would need to way up the level of risk against the immense benefits of Bitcoin to determine if it is a safe asset to buy.
As an advanced digital asset that functions as a diverse payment technology, bitcoin requires an advanced technology to power and secure its unique functionalities. The blockchain is an advanced technology that allows Bitcoin to provide incredible security features and serves as the building blocks for all of Bitcoin’s features.
💸 What Can I Buy with Bitcoin?
Bitcoin can be used to buy goods and services from within a growing number of different industries. The number of industries and businesses that accept bitcoin grows every year and most merchants will advertise that they accept the digital asset.