Bitcoin is a decentralized, peer to peer cryptocurrency which is used to make anonymous transactions without leaving behind any traces. Bitcoin is the first cryptocurrency to gain this much public attention and is being largely accepted by merchants as a form of payment all around the world.
In terms of usage, Bitcoin is no different from traditional currency. The users can buy, sell items through online as well as trade goods/services in physical stores. However, not everything is same. There are several factors that differentiate Bitcoin from traditional currency.
Let’s take a look at some of the major ways in which Bitcoin is different from paper money.
How Is Bitcoin Different from Traditional Money?
- Unlike fiat money, bitcoin is decentralized. There is no clearing house or authority (Government, Visa Network, MasterCard, Central Bank, etc.) to regulate the flow of cryptocurrency.
- Bitcoin network is peer to peer and is managed by users/miners around the world.
- The transaction fees are much lower because the money is transferred without going through a clearing house.
- The coins are earned by a process called Bitcoin mining. The miners around the world assemble blocks and are given mathematical problems to solve using Bitcoin algorithms. Those who are able to solve them correctly are rewarded with bitcoins.
- All Bitcoin transactions are stored in a public ledger called “Blockchain”. Anyone can visit this ledger to verify a transaction. This openness makes the cryptocurrency more transparent and reduces the possibility of any kind of fraudulent activity and double spending of the same coin. (Find out more on what is Blockchain and how does it work here)
- The currency can be obtained via Bitcoin exchanges or mining.
- For now, just handful of merchants on the web and in physical stores accept Bitcoin as a method of payment. However, the trend is increasing each day.
- A downside of bitcoins is that they are not insured by the government agencies which ultimately makes them irrecoverable if lost. If an owner somehow loses a hard drive or any other device in which the currency was stored, the coins are gone for good.
These are some of the facts about bitcoins that make them different from traditional currency. Now let’s go and look for the answer of” “is Bitcoin a good investment?”
Is Bitcoin A Good Investment:
Although bitcoins are gaining more acceptance and increasing in popularity each day, investing in Bitcoin is never considered a good idea. This because the currency is highly volatile and unpredictable.
For example, the Bitcoin price skyrocketed from $14 to $1200 and then dropped to $632 per BTC within a year. Such high instability in value makes Bitcoin a risky investment.
The best way to invest in bitcoins is to buying bitcoin with Paypal when they are being sold for less than $10 per BTC as this will give investors a larger margin of safety.