Bitcoin is a popular decentralized digital currency that everyone is thinking to invest in, but let’s not be immature and learn what Bitcoin is before jumping in like others.
Understanding the money
Now everyone knows Bitcoin is a currency, but how did it come into existence?
I am sure we all know that money wasn’t always in play, in earlier times people used a Barter system to get what they need. However, it had its shortcoming which we know as a lack of double coincidence of wants.
Now to solve this problem, we came up with the use of metals, but it had a huge disadvantage of the metal’s worth being more than what value it represents. Moreover, if you need let’s say just 100 of something to buy rice but you only have 500 worth of metal, you can’t start cutting it then and there to have what we want, right?
So, we had to move on from metals as well and came to with currency note which is called fiat money. Now, this was a good solution for a while however, it had its bad sides as well.
For starters, fiat money gave way too much control to the government as they oversaw how much a printed piece of paper was valued and the second was that with a lot of power or control so came the decision to print money. Now a government can print as much money as they need but to the law of economics, the more government will print the more the prices will rise.
Using UPIs or any other digital transaction could take some of the control from the government and give it to us but then we are still left with the second issue.
Thus, to solve all these problems that came from not just fiat money but a few others that we discussed before came digital currency.
Now digital currency is like any other form of currency that can be used, managed, stored or exchanged over the internet however, it does not hold any physical form to itself.
There are three types of digital currencies, are
- Cryptocurrency
- Virtual currency and
- Central bank digital currency
Today we are focusing on Cryptocurrency, to be precise Bitcoin.
What is Bitcoin?
There are many cryptocurrencies to choose from, but Bitcoin was the very first in this race.
Bitcoin is a digital currency that was announced in 2008 and was launched in 2009 by Satoshi Nakamoto. Being the very first Cryptocurrency, it is very famous and what makes it more tempting to people is its limited supply.
There are just 21 million Bitcoin in the entire world and only around 18 to 19 million of it is in circulation.
Bitcoin is decentralized which means there is no central power running this currency but then who manages or keeps a record of everything?
I could simply say many and none at the same time because these are the two answers you will get. But let me make it easier for you to understand.
Bitcoin does not have anyone in the middle to record and maintain a ledger, so when a person sends Bitcoin to someone else the information gets recorded in millions of computers not in plain English that we use day to day but in a cryptic language.
Then in the game comes the miners, who try to solve or decode this language and as a reward, they get Bitcoin thus this process is called mining.
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Pros and Cons of Bitcoin
Now that we have understood Bitcoin, let us see some pros and cons of it.
Bitcoin for some parts is like UPI, just like in UPI we have an id that acts as our identity and a way we can do transactions and a pin or password which is asked before you complete a transaction, similarly in Bitcoin we have an id and a private key as a pin/password, but with UPI it is centralised, with Bitcoin, it is decentralised.
Now that we have understood this small thing, let’s start with the Pros
- No intermediary required: – We know that in UPI we need to connect to a bank to do any transactions but in Bitcoin, you won’t need any kind of bank or financial institution to complete a transaction.
- No geographical barriers: – If we want to pay someone who let’s say lives in Canada then you can’t just send directly, you will first have to go through a bank and ask them to transfer and after a few complicated paperwork, they will transfer your money that too after some chargers. However, in Bitcoin, you don’t have to worry about any geographical situation while doing a transaction. Moreover, there are very less chargers.
- Very fast: – When we do any transaction it gets recorded by the bank in a ledger which is not the case in Bitcoin because there is no bank. Thus, your transaction gets approved within seconds without any hustle.
- Secured identity: – As banks hold a ledger of your transactions, they do it so by your UPI id, which is linked to a bank account that can be accessed by a bank or government at any given time but in Bitcoin, you cannot trace back the Bitcoin ID, thus your identity is safe and secured.
- You have the control over your currency: – just like we discussed above that if the government of India decides that they want to print more money can, they can even cancel some money but that is not the case with Bitcoin, you are in control of how much you are buying where the value of the coin/currency is determined by the market cap.
I hope you were able to understand the advantages or pros of Bitcoin with a little comparison. Now let’s get on with the cons.
- Irreversible: – The transactions done by UPI have an intermediary but in the case of Bitcoin, we don’t have any which means if you make a small mistake, your currency gets transferred to some else rather than the one you were intending to then there is no way to know who it was sent to or if they will ever return it.
- Illegal activities: – Till now we know that our Bitcoin ID is super secured, and no one can trace it back to us, this makes it an easy way for people to use it for transactions related to illegal activities.
Why is there hype about investing in Bitcoin?
Now that we’ve seen all this, you might wonder what the hype is all about or maybe not, but for a better understanding of everyone let us go through it once.
The first main reason for the hype was its novelty, which means the people saw something new and unusual with a lot of benefits and were all hypes about it. This novelty got it so successful in just a few years i.e., from 2010 to 2017 there can be seen a huge price gain in it.
What added to this was the limited supply and great interest which was obvious from seeing the charts.
Now should you Invest in Bitcoin?
The main question is, should you be investing in Bitcoin.
In December of 2017 Bitcoin was worth 19000 US dollars/Bitcoin and then after crashing it was still holding good at 4000 US dollars/Bitcoin in March 2020. Last year in January it went up to 42000 US dollars/Bitcoin after which had a little downfall but is still at 36000 US dollars/Bitcoin today when I am writing this.
This shows that the Bitcoin market is very volatile, it started amazing but when it faces a crash in 2018 people realized that as well. This crash happened because new cryptocurrencies were now launched which have seen and learned from the best i.e., Bitcoin thus, they were better than Bitcoin in some context.
Even after being so risky to invest, Bitcoin holds up to 65% of all the market capitalization which makes it the largest amongst all the Cryptocurrency
I am no expert in the market, neither am I an adviser but from my information, I would invest in Bitcoin and suggest you do as well.
But remember that putting all in once is a risky game so starting with small fractions is best.
It is just a suggestion and please don’t take it as a piece of advice, make sure that you go through everything properly and come up with a plan that best suits you before starting with investment.
FAQ: Should you invest in Bitcoin?
What is the price of Bitcoin?
Ans: Today on the 28th of April, Bitcoin is at 39552.30 USD.
Who launched Bitcoin?
Ans: Bitcoin was launched by Satoshi Nakamoto in 2009.
When did Bitcoin Market crash?
Ans: According to the resources, the Bitcoin market crashed somewhere in 2017.
Is Bitcoin illegal in India?
Ans: No, even though Bitcoin was temporarily banned but in 2018 supreme court lifted the ban on Bitcoin.
Is Cryptocurrency a legal tender of money?
Ans: No, just like any other stock Bitcoin is not a legal tender of money which means you cannot go out in the market and use it as a medium of exchange.