What is bitcoin? Should I invest in bitcoin?

3 Mins read

Bitcoin has become matter of the moment these days. It is the first and most popular cryptocurrency in the market. Bitcoin has been grabbing the headlines for more than a year now, from the time it first touched $1000 mark in January 2017, reaching record value of $19000 in December 2017, and then dropping to just $9000 last month.

However, the story of Bitcoin has more to it other than hitting headlines and swinging in prices. Bitcoin, also called digital gold, involves currency, mathematics, economics, technology, as well as social dynamics.

What is Bitcoin?

Bitcoin is a digital currency/cryptocurrency, which uses cryptography rules to regulate and generate units of currency. It is a completely decentralized digital currency, which means there is no involvement of any government, institution, bank, or authority to control it.

It establishes a connection between buyers and sellers using encryption keys. Bitcoins aren’t issued like traditional currency, but are mined through computers. Identity of owners remain anonymous, which means names, tax IDs or social security numbers aren’t revealed to anyone.

Who invented Bitcoin?

Bitcoin was invented by Satoshi Nakamoto, who published a paper in November 2008, and then released first version of Bitcoin software client in 2009.

However, nobody till date knows who Satoshi Nakamoto is. He didn’t reveal his identity, and faded from the community in 2011. By surname, people guessed he might be from Japan, but they’re not sure whether Satoshi was a he or she.

In May 2016, an Australian entrepreneur named Craig Wright told BBC that he is Satoshi Nakamoto. But people didn’t believe his words and the evidences he provided. Wright gave up on proving further, and the Bitcoin’s inventor mystery continues.

Should I invest in Bitcoin?

When the Bitcoin price touched $1000-mark last year, a lot of people around the world came up with several questions— How to buy Bitcoin? Where can I buy Bitcoin? How Bitcoin works? How Bitcoin transactions work? Should I invest in Bitcoin?

To buy a Bitcoin, the first thing needed is a Bitcoin wallet which can be easily downloaded for Android, iOS, or can be created on the exchange websites. You can add money to the Bitcoin wallet using traditional payment methods like credit/debit card, bank transfer, etc.

Using this money, you can buy Bitcoins on a Bitcoin exchange. If your budget is low, you can buy less than one Bitcoin, since it can be divided up to eight decimals.

Once the transaction is complete, your money will be deducted and Bitcoins will be transferred to your wallet. From the Bitcoin wallet, you can buy more bitcoins or sell them to redeem money.

The Bitcoin wallets either exist on cloud or on the computer of the user. It works like a virtual bank account, but these are not insured by any authority.

For those wondering where to buy Bitcoin from, it can be bought from digital currency exchanges like Coinbase, Bitstamp, Kraken and Gatehub. It can also be bought from other people, or transferred like sending cash digitally.

Coming to the primary question— should you invest in Bitcoin? When you talk about bitcoin investment, a number of different scenarios arise.

First, you can choose to buy Bitcoins to hold them, and wait for the prices to go high so that you can sell them back and earn profit. However, you don’t know when is the right time to buy Bitcoins and hold them. The prices may go up but there are equal chances of going them down.

What you can do is not to invest more than your potential, keeping the risks in mind. Buy Bitcoins only from the reputed exchanges so that you can save yourselves from fraud. There are a lot of fraud websites and applications which fool users and steal their money. That is the reason Google and Facebook have banned all the advertisements for cryptocurrencies.

Also, move the Bitcoins bought from exchange wallet to a physical wallet like Trezor, LedgerWallet, Keepkey, etc. to minimize the risk of getting them stolen.

Second, you actively buy Bitcoins and sell them to earn profit in brief time interval. It is trading in Bitcoins, different from buying and holding them. The Bitcoin trading needs deep knowledge and clear strategies.

There are thousands of traders investing millions every hour but not everyone gains from Bitcoin. Remember, whenever someone gains from Bitcoin, another person loses on the other side. There is no surety on which side you’ll end up!

Third, investing in other companies which pay you interest on Bitcoins through HYIPs (high yield investment programs). There are a lot of companies that claim to double your investments, or give you high amount of interest on daily basis, etc. Such sites collect the money from many investors with a promise of good returns.

What these websites actually do is pay interest initially by asking you to refer your friends. They pay the money which they get from new registrations. The process goes on for a few months until they collect a huge amount, and then they go offline, stealing millions from the users.

By now, it should be clear how to invest in Bitcoin and whether you should invest in Bitcoin or not. Even in the best-case situations, it is incredibly risky and may swing greatly in a matter of minutes. So, be very careful with whichever way you decide to go.

Disclaimer: This blog is entirely for general informational purpose. This does not intend to provide any legal advice or business advice from the site owners.

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