• Samuel Rad

What is Bitcoin, and is it Worth Your Investment?

Bitcoin today, is the most popular and widespread form of cryptocurrency, and yes, one of the top investment choices of wealthy people too. It was found as early as 2009. Roughly, this currency is time-tested now that it has survived for more than a decade! Not that bitcoin is the only cryptocurrency existing in the market; there’s Litecoin, Ethereum, and Ripple. They are relatively new and much less popular than the crypto that’s in discussion in this article.

Characteristics of Bitcoin

Bitcoin, like any other cryptocurrency, is a decentralized digital currency. There is no governing body or organization that controls the functioning and circulation of cryptocurrency. It is bought and sold online and has no physical component. The currency is generated mathematically. All the buying and selling is done through a peer-to-peer network. Neither any government nor bank controls the flow of Bitcoin in the market.

Bitcoin is stored in a digital wallet, and it is represented by strings of code. Owners need to save this code. You would naturally be inclined to know whether any technical knowledge is required to deal in bitcoin.

Given that there's no government or other regulatory authority that controls bitcoin trading, this currency floats across economies with the aid of a peer-to-peer network. Users anywhere in the world can make and receive payments. All of these transactions (across the globe) are recorded in a public ledger called the blockchain. In other words, blockchain is a proper digital account book of bitcoins.

The currency is often considered an alternative to traditional commodities like gold or cash. The Bitcoin network has steadily grown since its creation, and many investors believe in the future of the cryptocurrency, while others aren’t so sure.

In the past few years, the value of bitcoin has appreciated significantly, drawing the attention of investors. However, there are positives and negatives to Bitcoin investment, especially this late in the game.

Bitcoin mining

The technicality is more needed for bitcoin mining. So, what is bitcoin mining? Mining is the process of adding a new bitcoin transaction to this ledger. Mining, therefore, calls for solving complex mathematical problems, and in the process, discovering a new bitcoin. So, bitcoin mining primarily adds new Bitcoin to the blockchain ledger. The addition needs to be highly secure, and here’s where you might require some technical aptitude.

The 10 minutes – block rule

The creator of Bitcoin, Satoshi Nakamoto, had worked a method that allowed one bitcoin to be mined every 10 minutes. Maintaining this 10-minutes pace is paced with a lot of difficulties when it comes to the real world. With too many miners attempting to mine the level of difficulty rises. When the number of miners is less than needed, and less computing power is being used, the difficulty level decreases.

Often gaming computers – the ones with high processing power were used for mining. Eventually, dedicated computers and chips were created for the purpose. One challenge that you'd be faced with while solving the bitcoin algorithm to contribute to the blockchain is keeping your electricity costs low. Only then would your mining sustain and be profitable.

So, can miners across the globe mine an unlimited number of bitcoins?

No. The number of bitcoins is limited, and yes, there will only be a finite number of bitcoins that the world will get to have. The number, to date, has been capped at 21 million.

Is cryptocurrency worth an investment?

Today, cryptos can be used to buy a considerable amount of merchandise, which is a big leap from how things had been even a few years back. When this currency first came into being, it was expected to work as smoothly as the paper currencies of the nations (from buying a cup of coffee to real estate purchases). Although that has not materialized much, today, there several places (from eCommerce websites to car dealers to insurance companies) that accept this newest form of payment!

Since its inception in 2009, bitcoin has been widely considered as an alternative to traditional commodities like cash or gold. The value of bitcoin has appreciated significantly too, thus, drawing the attention of financial experts and investors. However, the bitcoin investment has both strengths and shortcomings. A quick review of them has been documented here.

  • Bitcoin is a transparent mode of transaction. The process through which bitcoin users have access to the ledger makes it quite a fair investment head.

  • Usually, the value of Bitcoin tends to rise despite all the market fluctuations. Investors, therefore, have high hopes.

  • On another front, bitcoin is only a decade old. On the credibility note, it hasn’t scored too big a figure. Moreover, high-risk-takers should deal in a bitcoin investment only. Some are still skeptical – “will bitcoin be worth anything in the future?”

Before making major decisions and/or risks with your wealth, seek the guidance of a Certified Financial Planner in Los Angeles. Cryptocurrency investment should be opted for only when the volume of your savings is high, and you invest only a negligible portion of the amount in this currency. You’d be taking risks safely!