Bitcoin Basics for the Bitcoin-Curious
It seems that the buzz word of the financial world these days is Bitcoin. Those who have it will not stop talking about it, while those who do not are wondering how to get their hands on it. It all came to a head when it skyrocketed in value from its initial offering of $13 in 2013 to a whopping $1,200 in November of 2017—only for it to come crashing down to just $566 soon after.
But despite the volatility and general shadiness of this most controversial of all digital currencies, Bitcoin is steadfastly staying in everyone’s collective consciousness and has no plans of fizzling away into obscurity anytime soon. Perhaps it’s time get in on the Bitcoin trade. At the very least, we can at least get to know it.
As we’ve already mentioned, Bitcoin has proven to be quite the volatile piece of currency. This is generally where the worst criticism stems from. After all, nothing good ever came out of volatile currency, historically speaking. Proponents of Bitcoin, however, insist that people are simply looking at it the wrong way. In fact, this volatility is actually a non-issue for some. Experts advise that to avoid volatility and reap the full benefits of Bitcoin, one has stay in Bitcoin and trade in Bitcoin, rather than go back and forth from the cryptocurrency to a mainstream currency like the US dollar.
Bitcoin supply is also non-volatile as it is fixed at 21 million. With only 12.3 million Bitcoins mined and currently in circulation, there’s still plenty to go around. The speed at which it is also being mined is highly regulated and controlled. This means that it is not in any danger from price manipulation and inflation, unlike the US dollar and other such currencies. It is also completely decentralized as its value is highly dependent on the number of people willing to use it and trade with it.
Link to illegal activities
Another thing that is contributing to Bitcoins dubious reputation is that it seems to be the currency of choice for funding illegal activities that occur through the darkest recesses of the web. When the FBI took down Silk Road, the infamous online drug market, for example, it was found that Bitcoin was the preferred medium of exchange. The reason for this is that Bitcoin allows its users to be relatively anonymous. There are, however, ways of lifting this seeming anonymity and tracing Bitcoin transactions to specific users, but it requires a lot of time, effort, and specialty software.
The question of security
Bitcoin is generally secure. In fact, it utilizes cryptography so secure that it is almost military grade. However, this does not mean that it is entirely infallible. There have been stories of people being scammed, Bitcoins being stolen, and even Bitcoins being fake. However, this is no different from just about any market out there. The fact of the matter is there will always be bad apples in just about any trade, market or industry. It is just a matter of separating the grain from the chaff. The easiest way to avoid being scammed in Bitcoin is to only transact and trade with reputable dealers and people that you trust. The risk factor is always looming, but it is up to you to avoid it.
As we have already mentioned, Bitcoin is currently decentralized, meaning it is not controlled by any government or financial entity. However, since it is generating so much interest and publicity, as well as a devoted following and a thriving trade network, the government is really starting to sit up and pay attention. This is then the biggest threat to Bitcoin—government regulation. Already the US Treasury Department has started to issue guidelines on virtual currencies. It will not be long before steps are taken to fully regulate and control Bitcoin and other virtual currencies, which will inevitably stifle its growth and its earning potential.
Like every newfangled thing, it is understandable to look at Bitcoin with trepidation and a fair measure of doubt. But really, it is not as scary or unpredictable as many would have you believe. The key is to get to know Bitcoin before plunging into its exciting new depths so as not to get lost in the process.
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