December 14, 2017
Bitcoin is the digital cryptocurrency that you may have been hearing about since years, but may not have invested in one yet. You'll be surprised to know that even though it was introduced way back in 2009, less than 1% of global population is familiar with Bitcoin and its working.
What is it?
Bitcoin is a non-aligned digital currency, which is not tied to any financial institution. The currency is not physical and is stored in a public ledger on the Cloud. A public ‘key,’ serving the role similar to a bank account number, is the address through which bitcoin transactions are made.
As mentioned earlier, Bitcoin was introduced in 2009 by an unknown person or group with a pseudonym Satoshi Nakamoto. It is a digital decentralised currency protected with layers of encryption and can be used to merchandise through a peer-to-peer network. Like gold, it needs to be mined. However, it is much more scarce, portable, durable, divisible and storable. These properties make it one of the ideal forms of money imaginable.
With the increasing reliance on the Internet, this virtual currency is gradually, yet assuredly, gaining the interest of a number of investors. Investment in Bitcoin serves as an excellent opportunity to delve into a completely new asset class. In the current scenario, people are now much more inclined to invest in Bitcoin as the potential return rate is much higher than in other assets like real estate, gold etc.
That being said, here are 4 things you must know before you invest in Bitcoin:
1. Bitcoins are scarce
There is an upper cap of 21 million on the total number of Bitcoins that can be mined. Consider gold as an example. As you need to use a lot of energy and resources to mine gold, it has the huge cost. The same scenario holds true for Bitcoin as well. You need high computing power to maintain a bitcoin transactions database and keep it synced with other miners, and this process is called mining. However, there is a small difference that we don't know how much gold is reserved on earth, but Bitcoin has upper capping of 21 million, of that around 1.67 million are already mined. As time goes by, Bitcoin will become harder to mine, which will ultimately lead to soaring values of this digital currency in the future. Thus, from an investment perspective, it would make sense to invest in Bitcoin now.
2. Decentralised Policy with Bitcoin
This cryptocurrency contributes towards a monetary policy that is sound, predictable, and can be easily verified by anyone. You can easily see when new Bitcoins are generated or how many Bitcoins are in circulation. The transaction can take place with ease between any corners of the world. Being decentralized, no manipulation, inflation or forgery with in Bitcoin is possible. It also makes cross-border payments possible. If used wisely, this global currency can have a significant impact on finance as well as the global economy. With so much potential in this digital era, one can see why investing in Bitcoin now may be a really good idea.
3. Bitcoin's Value
Bitcoin is a virtual currency that is not backed by hard assets. There is no definite price set on it. Its value is based on its mining cost. It is highly volatile and its value varies purely on the supply and demand.
4. Look before you leap
Even though it is slowly carving its way into the mind of investors as an attractive investment option, there are a few industry experts that still consider digital currency as a risky option to make a hefty investment. A lack of awareness about technology and the functionalities of digital currencies increases the risk of being duped by scams and third-party companies that try to take advantage of the over-eager investors looking to take a quick bite out of the Bitcoin pie.
So invest wisely! Look before you leap. There are websites like LocalBitCoins that allow you to find people nearby and carry out transactions in Bitcoins. However, we won't recommend it to the new investors. Instead, get in touch with an Indian BitCoin Exchange.
To conclude, it is imperative that you carry out your own research and critical thinking before investing in it. It could take months to understand Bitcoin's true potential and its impact on the world. Cryptocurrencies have a bright future and could serve as a new way to conduct commerce and business in the digital era.
Courtesy/Source: Financial Express (By Ashish Agarwal, Founder of Bitsachs)