Bitcoin is the most prominent cryptocurrency, but it is still a new invention. Here are the five truths about Bitcoin that you should know.
Bitcoin’s popularity and value have grown to mythic proportions over the last decade. Apart from pioneering an entire industry of cryptocurrencies, Bitcoin has also created robust investment opportunities, strengthening its position. While the majority use it as a means of payment, many institutional investors are also increasingly investing in Bitcoin as a reliable store of value.
Nevertheless, the following are some of the essential truths about Bitcoin that you should know before investing in it.
1. Bitcoin is Decentralized
Unlike fiat money, Bitcoin has no central authority that regulates its supply and usage in an economy. Instead, it runs on a peer-to-peer blockchain network, comprising random nodes in different geographical locations worldwide. The network has independent miners that validate transactions and mint new tokens at a standard rate based on the Bitcoin protocol.
Bitcoin’s decentralization means its transactions are not subject to government regulations or other political influences. It enables users to transfer and receive funds worldwide without the interference of government regulators, banks, or money processors. That also facilitates financial inclusion and autonomy in transactions.
2. Bitcoin is a Virtual Means of Payment and Asset
Bitcoin is a tech-based currency that you can only transact over the internet. Bitcoin users need just a smartphone and internet access to join the network. You will also require a Bitcoin wallet, an application for storing private keys. The wallet also generates a public key that serves as the user’s address for sending and receiving funds. Bitcoin also serves as an investment asset, but it only stores value virtually.
3. Bitcoin Has a Higher Volatility
Like other virtual currencies, Bitcoin remains a highly volatile asset. Its prices fluctuate rapidly and by huge margins over time. That is mainly because its value heavily depends on public perceptions. Bitcoin gains and loses value based on the public’s confidence in using it. Besides, Bitcoin lacks intrinsic value and has no ties with any physical commodity that would streamline its value in case of market turmoil.
However, Bitcoin’s volatility is also a unique characteristic that makes it a highly profitable asset. Although it is not usually effortless to predict Bitcoin’s price movements with the utmost accuracy, the price swings create opportunities for traders to profit from buying and selling crypto. Bitcoin revolution is one of the trusted crypto exchanges where you can buy and sell Bitcoin for profits.
4. Bitcoin Facilitates Low-cost Money Transfers
Bitcoin is increasingly becoming the new medium for cross-border money transfers, used by corporations, businesses, and individuals to move funds worldwide. Unlike traditional remittances that usually involve multiple third parties, Bitcoin transactions occur on a peer-to-peer network. The absence of banks, governments, or other intermediaries in Bitcoin transactions is why it is relatively cheaper than credit cards, debit cards, and bank transfers.
Bitcoin is also not subjected to the many costs such as account maintenance fees and minimum balance requirements imposed by financial institutions. Users only pay a small price to the miners to validate the transactions on the blockchain. Crypto exchanges also charge transaction fees for processing payments, but you can avoid the costs by transacting directly through your wallet.
5. Bitcoin Has a Limited Supply Cap
The Bitcoin inventors capped its supply to 21 million tokens only. Miners have currently minted about 19 million tokens circulating in the market. Bitcoin’s supply undergoes halving, reducing the number of rewards issued to miners by half every four years. The limited supply cap and halving process induce scarcity, allowing Bitcoin to attract and retain a higher purchasing power over time.
Overall, there are several things that you may still need to know about Bitcoin. However, the above article has discussed the essential Bitcoin facts to keep in mind when investing in cryptocurrency.