What is Bitcoin
What is Bitcoin and should I invest?
If you haven’t heard about Cryptocurrency in the last couple of years you’ve probably been on a mission somewhere in the Amazon Basin.
This exciting new technology is the talk of internet forum, tech shows and even financial markets the world over.
As a concept, it is equally as complex as it sounds and yet surprisingly easy to explain. In the interest of clarity, we are only going to discuss the very basics of it here.
Crypto-currency is mostly, but not entirely based on a new disruptive technology called blockchain. Whether or not you pay any heed to Bitcoin and crypto-currency is a moot point, if you want to stay ahead of the game keep your eye on Blockchain.
Blockchain is essentially a series of Public ledgers where each transaction is ratified with every other. Because this system allows a user to trace back any individual transaction, right back the even the first it is virtually tamper-proof.
By comparison, if you have an account with your bank only they keep a copy of the ledger and once money leaves your account there is no way for anyone to track it. Banks and other organisations get away with this because they are backed financially by gold, currency or a government or similar entity. If the bank gets it wrong the money is underwritten and you’re covered. There’s more to this, but we’re keeping it simple.
Now let’s take a look at the leading crypto-currency Bitcoin. Like most of the others Bitcoin is Underpinned by a Blockchain which means it’s figures are immutable, but unlike a real currency (known as a Fiat currency) it is not guaranteed by anything.
So why is Bitcoin worth anything ?
This is the easy bit, Bitcoin has value because people want it. Why people want it is another much longer story. Bitcoin exists on the simple laws of Supply and demand. Bitcoin has a finite supply and as that supply dwindles people it becomes scarcer and the harder it is to get the more it becomes worth. (there’s more to this too, but this is the simplest explanation.)
We will take about some of the reasons for this however because there are some simple ones. You can say what you like about Bitcoin and if you follow Twitter or Reddit and the like you’ll find folks often do… But one thing you can’t say is that the concept isn’t strong.
Sure it does have flaws and we’ll talk about those in a moment, but Bitcoin has proven time and time again that it is resilient. We’ve lost count of the times we’ve heard it described as a bubble and let’s be fair it is a bubble, but it’s proven a tough one to pop. Just spend ten minutes on Google and you’ll find a thousand predictions from fiscal experts the world over who’ve rubbished it and wrote it off over and over again… Well, to date, Bitcoin has always had the last laugh.
The flaws ?
Of course, there are flaws. It was designed in secret by the shadowy figure Satoshi Nakamoto somewhere in the dark web. At least that’s what legend wants you to believe. The alleged truth, however, is that is was a pair of Australian mates who came up with the concept and neither realised just what a monster they’d created.
One died penniless in 2013 while the other became fanatically wealthy and withdrew from public life. The concept which is nearly 10 years old began life as a hobby and the pair never expected it to reach the $300 net worth it boasts today. If you are thinking about putting money into Bitcoin just remember it was created by two hobbyists in a digital shed and is now starting to signs of its age.
There are hundreds of Crypto-currencies, portfolios and funds out there and it is very much buyer beware. If this journalist has any advice to offer… it’s this…
Read all you can about the coin you’re considering and be prepared to lose everything. The gains from Crypto-currencies can be fantastic, but so can the losses. Some coins have philanthropic undertones and at least if you find one you believe in, then you’ll have that to be thankful for if it goes south.