Bitcoin is a digital currency which was created in the year 2009 by an unknown person who went by the name Satoshi Nakamoto. Since its creation, Bitcoin has grown to be among the top cryptocurrencies available in the market today. It’s value has also seen tremendous growth since it started trading on exchanges.
To understand why investors love to invest in bitcoin, we need to consider some of its characteristics;
It’s Decentralized
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The very basis of Bitcoin is built on decentralization where miners serve as bookkeepers and nodes validate transactions before they are added to blockchains. Traditionally what happens in the banking system is that you entrust your money with banks who use people working for them ( tellers) and technology ( ATMs) to facilitate transactions. They charge for this service and it is the teller and ATM fees that bring them revenue. In bitcoin’s case, there is no one charging you money to facilitate your transactions. You can even choose to be your own bank in which case you will have to keep your own records of transactions and validate them yourself with a wallet software running on your computer or mobile device.For more information visit econintersect.com.
Programmable Currency
The bitcoin protocol enables developers with the ability to create applications and programs with specific instructions coded into its blockchain system that operate autonomously without outside interference. Given its decentralized nature, nothing prevents anyone from making changes in the code when they feel like doing so just as long as they can convince enough people in their proposal. This is what we call a hard fork and it usually happens when there is a disagreement in the community related to technical issues, ideology or simply lack of consensus. This happened recently with bitcoin cash being created from bitcoin by going through a hard fork. It was created because there were some people who did not want to increase block size.
It’s a Store of Value
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This is another feature that investors love about bitcoin. Its value has been growing steadily and increasing its worth substantially against other fiat currencies. In fact, this has been the case since it started trading on exchanges in 2010 with price hitting an all time high of $1638 US dollars per coin in March 2014 before falling later due to regulatory issues from China and other regions. It also faces competition from other cryptocurrencies such as Ethereum which have been growing rapidly during the same period while different application coins have come up for specific reasons just like the case with Mastercoin and Omni Layer .
This means if you have some fiat currency and you convert them to bitcoin today, their value after a while will be higher than when you first converted them which makes it a good store of value for investors.
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No Third party Interference
This is one thing that citizens living in countries with unstable governments or central banks appreciate about bitcoin, the fact that there is no government or bank interference in your transactions. More so, governments cannot make decisions on what they think should happen to your newly bought bitcoins.
In the case of regular bank transactions, governments can decide to freeze your account if they think you are involved in money laundering or terrorism financing but with bitcoin, this is practically impossible since it is all based on cryptography which means you would have to be able to decrypt every single transaction since the very beginning of bitcoin’s existence for them to see what’s going on inside.
Inflation Proof
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The total number of bitcoins that can be mined has been set at 21 million coins. No one can create more coins beyond this limit unless they have 51% computing power which means no entity will ever have control over bitcoin supply and prices in future. In case you didn’t know, traditional currencies are printed by central banks when the need arises making them prone to inflation at any time since it’s not based on anything real like gold or silver for example. Usually when a country is facing economic difficulties, the central bank prints more money to devalue it and people have to deal with increased prices of goods and services.
High Liquidity
This term is used in investment circles quite a bit especially when referring to assets. Liquidity refers to the ability of an asset to be converted into cash quickly without losing much value from its price. Gold, for example, has high liquidity because you can easily find buyers at market price but real estate has low liquidity as no one wants to buy a house they cannot live in tomorrow even if they are willing to pay the current market rate today. Bitcoin is also considered liquid since there are many exchanges that will convert bitcoins into fiat currency at fair rates within hours or days depending how urgently you want your cash.
It Has Big Future
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Many experts have predicted that bitcoin will become a new norm in future as it has all the characteristics which fiat currency lacks. Over the years, many people have been questioning why certain websites and web stores would accept payments made in bitcoins if they knew it had no real value. But this is fast changing as more companies are starting to see value in taking payments from customers by giving them their due products or services first before asking for payment via bitcoins knowing fully well that its value will not depreciate much even when they convert it into cash later on.
Final Words:
As you can see, bitcoins has many of the features that fiat currency has but it also has one of its own which is decentralization at its core. This makes even government authorities who are known for strict regulations on traditional currencies look at them with different eyes. They cannot ban them outright but they will work towards regulating how people transact with bitcoins in order to protect their citizens from fraudulent activities and money laundering schemes.
The future looks bright for bitcoin however, this does not mean there won’t be any issues along the way especially when people start to put entire countries on the bitcoin system without considering everything about what I have mentioned above beforehand
