What Is Bitcoin and Is It a Good Investment?
Bitcoin (BTC) is a new sort of digital currency-with cryptographic keys-that is decentralized with a network of computers utilized by users and miners all over the world and is not controlled by a single organization or government. It does not take first digital cryptocurrency that has gained the public's attention which is accepted by a growing quantity of merchants. Like other currencies, users can use the digital currency to acquire goods and services online as well as in some physical stores that accept it as a form of payment. Currency traders can also trade Bitcoins in Bitcoin exchanges.
There are numerous major differences between Bitcoin and traditional currencies (e.g. U.S. dollar):
- Bitcoin doesn't have a centralized authority or clearing house (e.g. government, central bank, MasterCard or Visa network). The peer-to-peer payment network is managed by users and miners around the globe. The currency is anonymously transferred directly between users on the internet without going through a clearing house. Because of this transaction fees less complicated lower.
- Bitcoin is created by having a process called "Bitcoin mining". Miners all over the world use mining software and computers to solve complex bitcoin algorithms and also to approve Bitcoin transactions. They're awarded with transaction fees and new Bitcoins produced by solving Bitcoin algorithms.
- There is a limited amount of Bitcoins in circulation. In accordance with Blockchain, there were about 12.A million in circulation as of Dec. 20, 2013. The actual to mine Bitcoins (solve algorithms) becomes harder fat loss Bitcoins are generated, along with the maximum amount in circulation is capped at 21 million. The limit will not be reached until approximately the season 2140. This makes Bitcoins more valuable fat loss people use them.
- A public ledger called 'Blockchain' records all Bitcoin transactions and shows each Bitcoin owner's respective holdings. Everyone can access the public ledger to ensure transactions. This makes the digital currency more transparent and predictable. Moreover, the transparency prevents fraud and double spending of the Bitcoins.
- The digital currency can be purchased through Bitcoin mining or Bitcoin exchanges.
- The digital currency is accepted by a limited number of merchants on the web and in some brick-and-mortar retailers.
- Bitcoin wallets (much like PayPal accounts) bring storing Bitcoins, private keys and public addresses and then for anonymously transferring Bitcoins between users.
- Bitcoins are not insured and are not paid by government agencies. Hence, they can't be recovered if the secret keys are stolen by the hacker or lost to some failed hard drive, or due to the closure of a Bitcoin exchange. If the secret keys are lost, the associated Bitcoins can't be recovered and would be out of circulation. Visit this link on an FAQ on Bitcoins.
I believe that Bitcoin will gain more acceptance from your public because users usually stays anonymous while buying services and goods online, transactions fees are much lower than credit card payment networks; the general public ledger is accessible by anyone, which can be used to prevent fraud; the currency supply is capped at 21 million, along with the payment network is operated by users and miners instead of a central authority.
However, I don't think that it is a great investment vehicle which is extremely volatile and is not very stable. As an example, the bitcoin price grew from around $14 to some peak of $1,200 USD this season before dropping to $632 per BTC at the time of writing.
Bitcoin surged in 2010 because investors speculated that the currency would gain wider acceptance and that it would increase in price. The currency plunged 50% in December because BTC China (China's largest Bitcoin operator) announced that it could no longer accept new deposits as a result of government regulations. And based on Bloomberg, the Chinese central bank barred finance institutions and payment companies from handling bitcoin transactions.
Bitcoin will more than likely gain more public acceptance after a while, but its price is extremely volatile and very sensitive to news-such as government regulations and restrictions-that could negatively change up the currency.
Therefore, I do not suggest investors to get Bitcoins unless they were purchased at a less than $10 USD per BTC simply because this would allow for a larger margin of safety.
Otherwise, I have faith that it is much better to buy stocks that have strong fundamentals, as well as great business prospects and management teams because the underlying companies have intrinsic values and are more predictable.