What is Bitcoin? What are the advantages of conventional currencies? Is it reliable?
These are some of the many questions asked when we hear about Bitcoin.Â All fair ones. Without further ado, let’s explain.
Bitcoin stands out mainly because it is a decentralized currency. In other words, it is not controlled by any country or Central Bank. Bitcoin is truly a global currency. If you’re familiar with the concept of inflation, then you know that Treasuries and bonds are the safest investments, but not exactly inflation-proof. It is subject to monetary policy set by The FOMC. Such is the problem of coins, and the reason why gold is used as a safe haven designed to maintain the value of capital.
However, Bitcoins are not subject to the same inflationary pressures. There is a limit on the creation of Bitcoins, with 21 million the maximum amount that can be in circulation. By 2033 , we will be close to reaching the maximum and no more Bitcoin will be able to be created.
What does this mean? That with Bitcoin we don’t lose purchasing power. That no central bank will be able to take measures or decisions that alter its value. In fact, we could see the Bitcoin as a type of digital gold, or even as the new active refuge that could replace the precious metal.
Below,Â we see the increase of the conventional currency in circulation, overlayed with Bitcoin value appreciating since it is designed never to surpass the 21 million units in circulation.
Let’s continue. It’s a totally digital and electronic currency, so if you plan to bring Bitcoins in your pocket,Â er…sorry. In fact, if it were not so, rather than in your pocket, you would probably need a sack full of coins because the Bitcoin is very divisible (usually up to 8 decimals although there is no limit).
Ah! The most important! I think that almost everyone has experienced being somewhatÂ “cheated” when changingÂ currencies, because we’re going abroad or when we simply want to make an international transfer, since we pay high commissions to intermediaries. You will be happy to know that with Bitcoin there are no such intermediaries, completely eliminating these commissions for transfers with bitcoins between users.
As you will see, this not only affects transfers, but you can also buy and sell goods and services at a fair price. In fact, there are already many companies that currently accept Bitcoin as a form of payment including Microsoft, Reddit, Dell, Tesla, Subway, etc…
And, it really is YOUR MONEY! Meaning, it’sÂ impossible for your account to be embargoed, frozen, or simply to be refused a transfer order. That’s right, a Bitcoins transfer is irreversible and your account untouchable.
Do you see how Bitcoin is starting to lookÂ more attractive? Well, this is just the beginning. If you are worried about your privacy, with Bitcoin, the transactions are completely private. In addition, this makes it much safer since you also do not have to give any sensitive information like your account number or credit card.
Hearing the typical news that hackers have stolen thousands of bank account data? Your bitcoin is safe. Apart from not disclosing sensitive data, the system is fully protected and encrypted. That being said, if it can be hacked, it will be hacked. And in fact,Â its already happened. But it is still far more secure and contains less information than your typical bank account.
Lots of information, right? Let’s summarize.Â
- It’s decentralized. It is not controlled by any state, bank or institution.
- You can change it for other currencies, and vice versa.
- There are no intermediaries. Transactions are made directly between the two parties. So they are irreversible. Your money can not be tapped.
- Impossible to falsify thanks to a complex cryptographic system.
- Your privacy is maintainedÂ as it is not necessary to reveal your identity.
- Transactions are immediate and there are no geographical or political barriers.
- The market is always open.
- Limit in the creation of Bitcoins. In contrast, central banks can create Euros, Dollars, etc
- Infinitely indivisible. Usually up to 8 decimal places are used.
- It is transparent. Although it is not necessary for one to reveal his identity, the transactions are recorded in a register of free access.
- The technology on which Bitcoin is based is several times more secure than that used by banks and credit cards.
I think it is an asset that should be in your portfolio but in small proportions since it presents a very high volatility.Â You can learn more about Bitcoin horror and fortune stories here. I think Bitcoin can represent the future of foreign exchange, and you should definitely take a closer look at investing in the now-mature currency.