Many people think of Bitcoin as only some sort of digital currency. However, that is a very narrow and limited interpretation of Bitcoin. According to experts, Bitcoin is composed of two central components-
- Bitcoin, as a representative of a code that established the ownership of someone who possesses the code. In this instance, it is very comparable to any fiat currency, and is only a tender for buying, selling, exchanging or transacting.
- Bitcoin, as a representative for an entire system of payments, finances, and economy. This is a much broader definition, which takes into account the Bitcoin ecosystem. This includes the ledger, Blockchain technology, and other related apparatuses.
Investors, who are looking to invest in the bitcoin circuit, often concentrate on the first point, while completely negating the second one. This is a mistake, which should not be made. It is the combination of both points, which will help you understand Bitcoin as an investment.
In this article, we are going to look at five important things that probable investors should know of before investing in Bitcoins.
5 Important Things to Note Before Investing in Bitcoins: The List
- Who created Bitcoin?
A person under the pseudonym of Satoshi Nakamoto first created Bitcoin in 2008. Until this date, nobody knows who is Satoshi Nakamoto, what country does he belong to, or what is his race, ethnicity, or even gender.
Satoshi Nakamoto created Bitcoin as an electronic peer-to-peer digital payment system. One of the foundations of Bitcoin was the recession of 2007-08. You can say that Nakamoto created Bitcoin as a response to the fragility of traditional financial systems and currencies.
- Why is Bitcoin different from other Currencies?
One of the major differences between Bitcoin and traditional currencies is control or ownership. People can pay and accept Bitcoins if both parties agree. However, there is not a central government or manmade law or institution, which can control Bitcoin.
Ownership is decentralized among a group of volunteer coders, keeping official channels completely out of the equation. This is meant to prevent the sanctity of the currency and not let it be manipulated by lawmakers and politicians for their own narrow self-interests.
- Is it possible for someone to buy Bitcoins?
It should be pointed out that Bitcoins are like stock options, which you can easily buy, sell, use as a transaction, or even trade-in. The first step towards dealing in any kind of Bitcoin is to set up your personal Bitcoin wallet to store your Bitcoins.
You can then approach either crypto exchanges or direct people through marketplaces and trading platforms, looking to sell Bitcoins. You can exchange cash in fiat currencies like dollar, or even pay for Bitcoins through Credit Cards or Debit Cards. Some sellers are also open to Wire Transfers and to exchanging Bitcoins with some other Alt Coins.
- What is Blockchain Technology, which runs Bitcoin Transactions?
Suppose an individual has to send Bitcoins as a method of payment to a merchant. He or she first needs to access the Bitcoin keys and show the intent to transfer the Bitcoins. It also needs to be verified that the same Bitcoin (with a specific serial key), has not been sending elsewhere.
Once these things happen, the transaction becomes a part of a ‘Block’. It also gets added up to previous transactions in the block history. This is why it is known as Blockchain. Once a transaction is done, it cannot be reversed, as there is no central authority to invoke someone to do so.
- Is Bitcoin good from an Investment Perspective?
Financial experts and Exchanges are alluding to the fact that Bitcoin is outshining regular stocks and shares and even gold in terms of profits or dividends for investors. They also state that Bitcoin is going to rise incrementally because of the Coronavirus pandemic.
This makes investing in Bitcoins a very attractive proposition for investors seeking to branch and differentiate their portfolios.
Featured image: Kiplinger