Investing In Bitcoin
Bitcoin is a digital currency created and held electronically. It was created in 2009 and became the first decentralized digital currency. Its creation is attributed to an unknown software developer or developers going by the name Satoshi Nakamoto. Bitcoin operates on blockchain technology that acts as a public ledger that holds permanent records of all transactions.
How to Use Bitcoin
Bitcoin is used for making electronic purchases just like Dollars, Pounds, or Euros but only a handful of merchants accept payments in bitcoin. Accessing bitcoin is another potential hurdle since the process is not very consumer friendly. Traditionally, you had to go to a cryptocurrency exchange to buy bitcoin and transfer it to your bitcoin wallet but things are now changing. Today, new services such as bitcoin debit cards and ATMs are now available to ease the process.
Investing in Bitcoin
It can be a good idea to invest in bitcoin since it presents so many benefits. Bitcoin has been outperforming traditional stocks and is currently worth more than an ounce of gold at the time of this writing. Here are a few more reasons why you should consider investing in bitcoin:
Decentralization
Today, people have an unprecedented level of distrust in the current financial setup. In the wake of the 2008/2009 global recession, the resentment towards banking institutions by both private and public institutions is growing. People are thus warming up to the idea of using different mediums of exchange such as bitcoin.
Deflationary Model
The bitcoins that can ever be mined are limited, which means that the problems of inflation associated with traditional currencies don’t affect bitcoin. In theory, the price of a bitcoin would grow infinitely in a completely free market where each coin would potentially be worth hundreds of millions of dollars. However, this would involve a significant acceptance of the currency globally as well as other factors coming into play, but on paper the value of each coin should rise as trade continues to rise.
How Can You Invest in Bitcoin?
Buy and Hold
One of the easiest ways to invest in bitcoin is to buy some and wait for their value to rise. This approach has already made a sizeable number of people quite wealthy. The people that bought Bitcoin early on have enjoyed significant increases on their investments. Originally, Bitcoin sold for a few dollars and now it is worth about $3,000 at the time of this writing.
Mining Investment
Transactions on the blockchain are verified by a distributed network of powerful computers. If you contribute your computing power to this distributed network, some of the freshly minted coins will be apportioned to you as an incentive and reward for transaction processing. The network adjusts as more computing power is added to it which means that a constant number of bitcoins are generated relative to the increase in computing power. The process described here is known as mining and is one of the ways you can invest in bitcoin.
Investing in Companies
If you prefer the traditional approach to investment you can invest in one of the many emerging bitcoin startups. Bitcoin creates new approaches to online transactions and increases the efficiency of old models, which usually brings profit. If you invest in a company innovating in this industry, you will benefit from the technology without the need to speculate on the commodity (bitcoin).
The Bottom Line
Bitcoin is an excellent investment vehicle even for those that are risk averse. The important thing is to invest in only what you can afford to lose since it is highly volatile. You should also educate yourself about the risks, advantages, and disadvantages of using different bitcoin storage methods.