What is Bitcoin ?. Let’s find out
Bitcoin has been one of the most popular investments over the past couple of years. It’s made a lot of people millionaires. But it’s also made quite a few people paupers. This is because they’re uneducated about the investment that they’ve made. It’s the biggest form of cryptocurrency. It’s the most well-known 1 & it’s the 1 that’s been the most adopted. Now to understand cryptocurrency you need to understand what money is ?. Money is just an agreed-upon store of value acknowledged by everyone as a form of payment. Money in itself doesn’t hold any value.
Back in the day, you could’ve exchanged money for gold. But today money is not backed by anything. The only thing that makes money valuable is because we’ve all acknowledged & accepted it as a form of payment. Now the problem with money is that it’s centralized. It’s controlled by the governments & the central bank. So, with the dollar or any other currency, you’re entirely at the whim of their choices. If they choose to constantly print money which is what they’re doing & devalue it you don’t have a say. Your hard-earned money in the bank gets eaten away by inflation & it’s now worthless.
What is Bitcoin ?. The benefits of it.
Another problem is if you decide to send money abroad you get hit with exchange fees & exchange rates. If you choose to make transactions again you’re often hit with more fees. The notable thing about a cryptocurrency like bitcoin is it solves all of these problems. It’s not centralized. It’s decentralized. You don’t just have to rely on 1 central bank’s ledger of keeping track of everyone’s money which none of us can see. Bitcoin every computer that takes part in the system keeps a copy of the ledger. So it’s unfeasible to take down the system. Because you’ll have to take down 1000’s of computers who keep a copy of the ledger. It’s safer as everyone can see it as it’s transparent. Not 1 central authority has control over it & arguably the most important is it’s protected against inflation.
With Bitcoin, there are only 21 million total coins available in the system. So you can’t print more & devalue it. So you look at all of the problems that are associated with currency, Fiat money & cryptocurrency solve all of it. But that brings us on to the question ?. What normally happens with a currency or just business, in general, is 1 normally rises to the top & takes all of the market shares. For example with search engines, you don’t know Cuil, Alta vista, Infoseek, or All the web. You only know Google. People don’t use Live Journal, Friendster, or Myspace. You use Facebook. 1 thing dominates the entire sector & that’s most likely what will happen with cryptocurrency.
Will bitcoin be the cryptocurrency of the internet ?
So will bitcoin be the cryptocurrency of the internet ?. The 1 that rises to the top. Most likely will be. At least Bitcoin is leading the race. Money is just about mass adoption. It’s about everyone acknowledging that it’s an exchange of value. Right now, Bitcoin is the closest to getting this done. Most people haven’t heard of Litecoin, Dash, Monero, Ripple but you ask people on the streets if they know bitcoin & they likely do. Is Bitcoin a good investment ?. Essentially there are just 3 steps that you need to go over to buy Bitcoin. The 1st is you need a wallet. Just like with cash. You need a wallet to put it in.
It’s the same with bitcoin. Except Bitcoin is a digital wallet. So, the wallet is being used for sending, receiving & storing Bitcoin. There are 2 types of wallets that you can get. 1 is the software wallet that can be run on your computer or mobile device. A software wallet is a cut above & easier with just small amounts of Bitcoin. 2nd is a hardware wallet. It’s the device that connects to your computer. It’s considered much safer. Once you’ve got the wallet then you need to buy some Bitcoin. You do this through an exchange.
The risk factor
Some of the popular examples of these are Gemini & Coinbase. Finally, once you’ve bought the Bitcoin through an exchange all you need to do is withdraw it from the exchange & send it to your wallet. It’s a pretty simple process. The best way that you can think about investing is through the lens of risk & reward. How much can I lose ?. But how much do I stand to gain ?. What are the chances of each ?. So let’s begin with the risks of Bitcoin ?. With Bitcoin, there’s a chance that you lose everything. Bitcoin is a currency that is 100 % technology-based & it’s reliant on people eventually adopting it & using it as a currency. As time goes on more & more people are learning about it, using it & adopting it.
But this is no guarantee that in the future they’ll continue to do so. If everyone decides to sell it & not think about it anymore then it’s catastrophic. Your investment goes. But the potential reward for Bitcoin is huge. The reward is way substantial than the risk. So, let’s think about the reward. Gold is akin to bitcoin in many ways. Although it’s physical. It doesn’t have much & only has a store value. Gold can be mined just like Bitcoin. It has a short supply just like Bitcoin. It’s used as a safety fence from an economic crisis just like Bitcoin.
The potential reward
The total worth of all of the gold in the world is around 12 trillion dollars. Bitcoin’s total market cap is roughly around 600 billion dollars. That’s around 20 times smaller than Gold. If Bitcoin were to grow to the same market cap as Gold we would see a 10, 20, 30 times return on our investment. I’m not saying that it’ll get there. But it could. That’s why the way I see Bitcoin as an investment. There’s a lot more potential to gain than you’ve to lose. If it was lose everything or double your investments it would be balanced. But the potential is way more than double.
So you’re on the right side of the risk & reward equation. But you don’t want to bet your whole life’s savings that bitcoin is going to go up. Remember the risk. You could lose everything. You should only invest what you can afford to lose. So, play this investment smartly. Bitcoin is a higher level than the Fiat money that we’re currently using. Think about Tesla. 10, 5 even 3 years ago people were saying that Tesla is a worthless company. But now Tesla is the biggest car company in the world. Why ?. Because it had superior technology & was creating a better version of transportation.
It’s the same thing with Bitcoin when compared to the flawed monetary system that we’re using. It’s just better overall. Billions & trillions of dollars are being printed every year. Devaluing the dollar by the second. You’ve got governments with more control than ever before. Lockdowns, businesses being shut & crazy politics. Bitcoin doesn’t rely on any 1 institution. So it may not be a foolish idea to have some investment in it. Your future self might appreciate you for it.