Bitcoin is the first-ever crypto that gave shape to the concept of decentralized digital currency. It was established in the year 2009. It is not backed by any bank or government and its transactions are based on peer-to-peer networking. The transactions are end-to-end encrypted making them secure for a wide range of usage. It runs on the technology called a blockchain.
Not only it is a popular trading cryptocurrency, but several companies such as Wikipedia, AT&T and Dallas Mavericks also take payments in Bitcoin. Would you like to know more about it? Here’s the cryptocurrency explained in detail.
Concept behind bitcoin
A few terms such as Blockchain, Bitcoin Miners, and Public & Private Keys are the important points behind the functionality of Bitcoin.
Blockchain
Blockchain, the biggest support Bitcoin has, helps the common man have access to a public ledger. With every transaction, a block is generated and is chained to a code related to it, hence justifying the name. Not only Bitcoin, but this advanced technology is now a part of almost every other cryptocurrency.
Bitcoin miners
Bitcoin miners are paid via Bitcoins. With access to high-speed computers, these peer-to-peer members are a huge part of the entire cryptocurrency operation. They confirm each transaction within 10 to 20 minutes.
Public & private keys
Every Bitcoin wallet has a public and a private key. They function cumulatively to authorize an individual to sign in to the wallet.
Bitcoin price volatility
Just like any other area, bitcoin price fluctuations also depend on the law of demand and supply. When demand increases, price soars, and vice versa. This creates volatility in the cryptocurrency.
Also, there are several costs involved in generating just one Bitcoin like continuous mining, high-performance computers, and the guidance of technical experts. This affects the supply part and increases the price volatility at times.
Where can you store Bitcoin?
Cold wallets
You need to know that cold wallets are more of a portable option, which is protected by encryption and helps you take your Bitcoins everywhere.
Hot wallets
With hot wallets, you can access Bitcoin via your phone, laptop, or PC. The number of bitcoins you have is stored on a cloud platform that is governed by a trustworthy exchange.
A cold wallet lets you save your bitcoins offline, but in order to do so, you are required to download a hot wallet and transfer your bitcoins to the offline cold wallet.
Pros and Cons of buying Bitcoin
Below are a few pros and cons of buying the cryptocurrency.
The advantages
- It has a lot of strength to grow: Bitcoin has gained a lot of trust over the past years, and investors see a greater value in the near future. They believe with the number of people interested to invest in the cryptocurrency, it will continue its upward trajectory.
- Safer transactions: It is considered to be a safer mode for all transactions since it is backed by Blockchain, an intensive decentralized coding that facilitates the strongest level of security. Besides, the chances for identity theft or any information theft are also less as there are no crucial details saved.
- Eliminates banks and other governing bodies: Regardless of the fact that in order to purchase Bitcoin you still need to link your bank account and fund the trading account with fiat currency, the need for involving banks and governing bodies is almost zero. In fact, ever since the financial crisis of 2008, people willing to invest have always looked forward to digital currencies that have no interference from a third party.
The disadvantages
- No protection by SIPC: Securities Investor Protection Corporation gives up to $500,000 in case of fund theft or legitimate brokerage issues. This facility is available to all trades and investments, but not cryptocurrency. Therefore if your Bitcoins are stolen, there won’t be compensation.
- Price spikes: The way Bitcoin’s price raised in 2017, people went gaga over it but we also know about its fall downs. Prices can fall by more than half.
- Can be hacked: Blockchain tech is safer than any other digital mode of payment, but still, it is a goldmine for hackers and has been a victim of theft many times. Like in May 2019, from a crypto exchange called Binance, Bitcoins worth $40 million were stolen.
Where to buy Bitcoins and should you buy them?
You can buy Bitcoin from Crypto Exchanges, Peer-to-Peer exchange platforms, Bitcoin ATMs, or can even mine your own Bitcoin. With the cryptocurrency explained to you in this article, you now know the pros and cons of this cryptocurrency. But, if you follow the basic investment rules and don’t invest more than 10 percent of your portfolio in any one financial asset, you won’t have any issues in the future.
