Bitcoin: A brief overview
Bitcoin, the cryptocurrency with no physical form, is created electronically and held likewise. It can be used to buy even the smallest of things such as coffee and in its digitized forms is not very different from the conventional currency.
However, the working of the bitcoin is different from that of the conventional currencies that have been in use all across the globe. While the conventional forms of currencies are based on reserve backup of valuable metals, such as gold and silver of the same amount, bitcoin’s functioning is based on mathematical protocols. Plus, any transaction that occurs using Bitcoin is recorded in a public ledger, using its unit of account.
Bitcoin was devised to give us a decentralized economic system open to all, which proposed to its users a monetary and exchange system of value, far better than the current fiat money system. Its value is dependent on the trust of its users and isn’t controlled or regulated by any bank, which is why its value is so volatile. However, despite the volatility, investing in bitcoin comes with great prospects.
Unocoin is India’s leading Bitcoin company which enables Indians to buy, sell, store, or use bitcoin as per their wish. It provides a platform for the users to buy or sell Bitcoin using INR or by matching their orders with other users. It also helps users to carry out bulk tradings.
Benefits of investing in Bitcoin
Let’s delve into the advantages of bitcoin to understand why investors are flocking around this cryptocurrency:
The liquidity of a cryptocurrency is the amount of ease at which it can be converted into cash or other assets without impacting the market price. Bitcoin has come out to be one of the most liquid investment assets all across the world. As a result of the worldwide establishment of trading platforms, exchanges, and online brokerages, people can now trade bitcoin instantly for cash and other assets like gold, etc. This ease of access comes at a very nominal charge.
This feature of high liquidity associated with bitcoin as compared to other cryptocurrencies proves to be one of the most significant advantages of investing in Bitcoin if one is looking for a short-term profit. Due to high market demands, these digital currencies are not limited to their association with short-term profit. They can also be considered beneficial in long-term investments.
2. Immune to inflation
There is a top limit as to how many coins will ever exist, and the cap is set to be 21 million. This was consciously done by the inventor of Bitcoin as a part of its design to serve the purpose of making it non-inflationary.
The fixed limit give it a major advantage over the archaic physical currencies, which are prone to losing value with time. This immunity to inflation implies that Bitcoin will always retain its value in long term. Thus, it will be a viable alternative to the physical currencies of countries like Venezuela, where there is rampant hyperinflation.
This immunity to inflation is one of the main benefits of investing in Bitcoin.
3. Global payment is made quickly
If you ever ask a person who has completed an International bank transfer through conventional means, you will get to know that it isn’t an easy process, not the one they would prefer if they had an alternative. Plus, the cost isn’t low either. The advent of certain online platforms like PayPal, etc., has made it much easier and cheaper than before, but even then, there are certain configuration issues and fees, which need to be taken care of.
Bitcoin, on the other side, allows you to easily complete your international transactions, and that too without having to pay any extra fees to any third party as such. These can be sent to any country in the world without any issue of the border. This increases the benefits of bitcoin for the business owners specifically. As markets are becoming increasingly globalized, more and more customers are taking advantage of services and products provided by companies from abroad.
4. Decentralized network
One of the major features which adds to the advantages of bitcoin is that it is a decentralized model of the network, which means that its network of transactions isn’t controlled by any financial institution or government organization. It is distributed amongst thousands of nodes and millions of users all across the world, and you don’t have to rely on any third party.
This means no agency can have control over it, and nobody can play with its monetary policy or change its value, nor can anyone mess with its creation and distribution. The Bitcoin, hence, is out of any political interference, saving users of bitcoin from the control which is exercised over people using FIAT money.
5. Safe and secure
Another benefit of bitcoin is that you can be assured of the safety of Bitcoin. In each of its operations, including its core, Bitcoin possesses one of the most powerful; cryptographic systems. It is at least as powerful as those which are used by our banks or by our crucial day-to-day services. The distributed nature of bitcoin makes it resistant to network outages or attacks.
Being decentralized makes bitcoin safer and less vulnerable to any sort of security threats.
There is the least amount of risk for a bitcoin user in case of a retailer or a partner in the transaction being subjected to a cyber attack and losing financial or personal data of its own or its customers. The only possibility of the risk happens to occur if a hacker gets access to their private keys.
Bitcoin is more pseudonymous rather than being anonymous, which implies that the transactions are completed under a pseudonym but still have the capacity of being linked to a physical user. So, for the users who are uncomfortable entering their financial details online, Bitcoin comes with an alternative, which at the least, appears to offer legit security.
6. Ease of access
As bitcoin happens to be a digital peer-to-peer form of money, sending money to any part of the world, irrespective of its amount, is now possible in just a matter of a few seconds to minutes. It is easy to set up and is a much faster, hassle-free process as compared to the traditional time-taking ways of transferring money.
7. Negligible Charge or transaction fee
One of the advantages of Bitcoin investments is that there will be negligible to no fees levied on the transactions, irrespective of the transactions being national or international. It is the first cryptocurrency that avoids the two-time spending by making verification of each transaction and adding it to its chain to maintain uniqueness in the inputs.
8. Anonymity (zero paper verifications)
Bitcoin is pseudonymous, and if used correctly, it can also be used as an anonymous currency, which would be free from the spying of government authorities. This is because when you use Bitcoin, there is no need for you to provide any of your personal information, including your name, email id, etc., when you are indulging in a peer-to-peer transaction. If you know how to use it, Bitcoin will be revealing nothing as they would just be the binary numbers.
9. Censorship and seizure resistance
Bitcoin uses a computational mathematical algorithm, which is known as ‘proof of work’ (PoW), which means that nobody can block your transactions. This acts as another one of the advantages of bitcoin. Plus, nobody can seize your bitcoin as it is not housed by a bank or any other institution as such. It is you who owns it, and it is you who holds it with yourself. You are the bank of your money.
To transfer the bitcoin from one owner to another, the new owner is supposed to give his public key, and the previous owner uses his private key to publish a record in the system, announcing the change of ownership. Every single detail of the transaction which took place is stored by Bitcoin in the network in a huge version of a general ledger or a blockchain. All these transactions are public and are visible in real-time under pseudonyms in the form of a Bitcoin address. Anyone can reveal the Bitcoin address that they manage with utmost transparency as to where every single penny goes.
11. Advantage over other cryptocurrencies
Bitcoin isn’t just more advantageous than physical currencies. There are various advantages of bitcoin over other cryptocurrencies too. For instance, Bitcoin is much more stable as compared to other cryptocurrencies. The network of Bitcoin is growing with every passing day, as a result of which, Bitcoin is more liquid as compared to other cryptocurrencies. Moreover, the security of its owners is an important focus of Bitcoin, in consideration with other cryptocurrencies.
The most crucial point about bitcoin is that its value is far more than the rest of the cryptocurrencies. One Bitcoin has more value than one unit of any other cryptocurrency. Bitcoin is thus much more popular too. While other cryptocurrencies are mostly limited amongst cryptocurrency enthusiasts, Bitcoin is being purchased and being invested in by millions of buyers and investors worldwide. Various big personalities and businesses have been investing in it too.
The phenomenon of cryptocurrencies is developing at a great speed. At the time, in the market of cryptocurrency, Bitcoin is considered to be the king. It is the major player with the highest liquidity and is considered to be the safest and secure form of cryptocurrency. While the trade of other forms of cryptocurrencies is limited to cryptocurrency enthusiasts, the interest in trading with Bitcoin is shown by several people, including big entities and business groups.
Now that you are aware of the various advantages of investing in bitcoin let’s look at some important FAQs.
1. Is bitcoin good for the economy?
Ans: Bitcoin has some downsides. For instance, illegal activities and speculations through these coins are blurred, are volatile, the financial regulations are not well defined, nor are the legal status.
While Bitcoin has various drawbacks, it also has tremendous merits. For instance, it is easy to set up and is fast. Moreover, it has low fees; the transactions are irreversible, is immune to inflation effects, has zero government regulations, is a decentralized network, protects identity, etc.
Even after certain disadvantages, Bitcoin proves to be a much better alternative to physical currencies. They are even considered to be the future of the currency system.
2. How does bitcoin provide greater liquidity as compared to other cryptocurrencies?
Ans: Liquidity of a cryptocurrency is the ability of a coin to be converted into cash or other cryptocurrency coins. The trading volume of a cryptocurrency affects its liquidity. Since the trading volume of Bitcoin is very high and has been increasing recently, i.e., more people are buying and selling these coins. The liquidity of Bitcoin happens to be much more than other cryptocurrencies.
Advantages of bitcoin was originally published in Unocoin’s Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
This post first appeared on What Happens If You Forget Your Bitcoin Wallet Keys?, please read the originial post: here