Bitcoin Benefits And Why Cryptocurrency Is The Future of Finance
In our first post on Bitcoin, Bitcoin, Blockchain, and Cryptocurrency: What You Need To Know, we explained what Bitcoin is, how it works, the technology behind it, and how you can go about acquiring it or other cryptocurrency. The question now becomes: WHY should you invest in/use Bitcoin or other cryptocurrencies? And, the potentially trillion dollar question: Is cryptocurrency the money of the future?
Why Should I Use Bitcoin?
Quick, Convenient, And Global: Transactions can be sent nearly instantaneously anywhere in the world, and even with its extensive security measures in place, it only takes a few minutes for confirmation. Because the transactions take place over a global network of computers, it doesn’t matter what your physical location is–the speed is always the same: fast!
Secure: With Bitcoin, the users themselves are always in control of any and all transactions. Because payments are made without personal information attached, there is no risk of identity theft. Strong cryptography, massively large numbers and complex mathematical equations make it virtually impossible for hackers or fraudsters to crack cryptocurrencies. Only the owner of the private key can send cryptocurrency. Put simply, a Bitcoin address is more secure than your local bank.
Transparent: All Bitcoin transactions are fully available on the blockchain for anybody to verify and use in real-time.
Pseudonymous: Bitcoin transactions are not linked to any personal information, allowing users to protect their privacy. Bitcoins are sent and received to addresses, which are random chains of 30 characters. Users can view activity linked to a specific wallet address and it is possible to analyze the transaction flow to see where money is going, but it isn’t possible to connect real-world identities to these addresses.
Irreversible: Once confirmed, it is impossible to reverse a transaction. Seriously. Nobody can reverse it, not you, not a miner, not a bank, not original Bitcoin creator Nakatomi Satoshi, or your government officials. For merchants, there can be no charge-backs, which is good for business. If you send money, it’s gone, so you do need to be careful what you send!
Controlled Supply: Most cryptocurrencies limit the supply of the tokens and control the supply of the token by a schedule written in the code. The monetary supply of a cryptocurrency in any given moment in the future can roughly be calculated today. This protects against inflation and any “surprises.”
Low Fees: In most cases, the fees for Bitcoin transactions are very small. Some wallets will allow you to pay a higher fee in order to get faster confirmation of your transactions.
No Middle Man: Forget about banks or other financial institutions controlling the flow of finances, taking a cut/charging fees, or telling you when you can use your money. With Bitcoin, there is no middle man.
Permissionless: No one can stop you from buying, receiving, or sending Bitcoins or other cryptocurrencies. Download some software, sign up to an exchange, and set up a wallet. The choice is yours.
No Debt: The money in your bank account is technically an IOU from your financial institution that says “We owe you this money, and we’re good for it.” In essence, the number you see represents a debt. With cryptocurrency, this is not the case: you can think of them as real, physical, pieces of gold.
This all sounds pretty good! Should I Invest in Cryptocurrency?
Despite the plethora of advantages offered by Bitcoin and other cryptocurrencies, much of the hype surrounding it is about getting rich by trading or investing in it. In October 2015, the price of Bitcoin was $330. A year later, it had more than doubled to $700. And then, in 2017, it exploded. It quickly shot through the $1000 mark and kept going up, reaching $20,000 by December 2017. The price has since fallen by nearly half, with the current USD price of 1 BTC valued at $10,500.
If you had bought $1,000 worth of Bitcoin in 2015, it would be worth about $40,000 today. However, if you had bought $40,000 worth of Bitcoin over the Christmas 2017 holidays, it would only be worth $20,000 right now! As you can see, Bitcoin is a volatile investment, and you have to be ok with not only price fluctuations of 10-20% in one day, but you also have to be ok with losing everything in a single week.
Remember, Bitcoin is a currency, not a company. There are no cash flows to analyze or financial reports to review. Ask a hundred financial advisers and you’ll get a hundred different answers on what the price of BTC will be at the end of the year. It could be $1,000. It could be $100,000. It could be $100 or it could be $1,000,000!
You’re not the only person with a major fear of missing out on the next boom. But, the market of cryptocurrencies is fast and wild. Every week, new cryptocurrencies emerge and their prices go “to the moon,” while other cryptos wither and die, leaving their investors heartbroken (and just plain broke).
Here Are Some Investment Tips:
- If you’re going to invest, do your research, and never invest more than you are willing/able to lose. Bitcoin is a risky investment.
- Make sure to buy Bitcoins only from exchanges that have a proven reputation.
- Don’t buy all of your Bitcoins in one trade or all at once. Use “dollar cost averaging” and buy a fixed amount every month, week, or day throughout the year. This will give you the average price over the course of a whole year.
- After you buy Bitcoins, make sure to move them into your own personal wallet. Don’t risk the possibility of a financial attack by leaving them on an exchange. It’s happened before.
Is Bitcoin and Cryptocurrency The Money of the Future?
While the markets may be turbulent and forever shifting, a steep decline or rise in prices doesn’t change the fact that cryptocurrencies don’t seem to be going anywhere. They have already changed the world. Although they were slow to catch on at first, banks, governments, and large investors have realized the importance of cryptocurrencies and blockchain technology, and the potential they have to replace the current currency system. Some people envision a future where Bitcoin (or Ethereum, or Litecoin, etc.) is as readily accepted as a form of payment as US or Canadian dollars. For many crypto-enthusiasts, this future isn’t that far off! At this point, only time will tell.
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