If you have never heard of Bitcoin before then you’ve probably been living under a rock for the past few years. Truthfully when I first heard about cryptocurrencies 3 years back it sounded like gibberish. I looked at the chap passionately explaining the concept with the sort of look I usually reserve for David Icke books and anything said by Andile Mngxitama.
Over the past year I have moved out of the financial stone age into the modern era by educating myself as much as my old brain can manage on all things cryptocurrency.
Even if they do not accurately understand how it works, most people are at least somewhat familiar with Bitcoin. However, once they begin to get involved with cryptocurrency, they may be surprised to learn that there are actually hundreds of types of cryptocurrencies known as altcoins (approximately 780 at my last check).
Simply put, Bitcoin is an open-sourced digital decentralized currency that works of a peer-to-peer platform called the Blockchain.
I say “simply put” but I’m confident that I should clarify what it all means.
It is DIGITAL – Bitcoin is an internet currency. It is to money what email is to snail-mail post. You can send Bitcoin through the Internet in the same way you’d send an email.
It is DECENTRALIZED – Bitcoin is not linked to any fiat currency (Dollar, Rand, Pound, Yen, etc.) and it is also not linked to any country.
It is OPEN-SOURCED – It is not restricted to any person or group. Anyone can have access to Bitcoin in the same way that anyone can have access to the Internet. There is nothing stopping anyone from owning or transferring bitcoin.
It is PEER-TO-PEER – When you transfer Bitcoin from one person to another or if you purchase anything using Bitcoin, you are sending it directly to the other party without having to transact via a bank or clearing house.
It uses the BLOCKCHAIN – The Blockchain is a transparent public ledger that records every single transaction that ever occurs. The record of transactions is kept via the dispersed network of Bitcoin Miners (computers with highly specialised processor chips that are responsible for verifying all transactions and keeping the records of each and every one).
I know that if this is the first time you’re hearing about Bitcoin, you’ve probably started to look at this article in my David Icke expression. I’m sorry.
Bitcoin is as much of a leap in how we transact with money as it was when we moved from using only cash to having a credit card. Actually, that isn’t accurate. Bitcoin and cryptocurrencies are a much bigger paradigm shift, as within a few years we are going to see a monumental shift in how not only money, but also data is stored and moved.
IS IT A SAFE INVESTMENT?
Bitcoin first saw the light of day on the 3rd January 2009 through an unknown programmer using the pseudonym Satoshi Nakamoto. It’s a very new concept that is still working out its kinks and this can be seen in the steep bull and bear trends that one can see if you look at the value tracker since inception.
Any commodity or investment that can lose 30% of its value in a day and then regain all its loses and more 2 weeks later, also in a narrow time period would leave even the most battle-hardened trader clutching their heart. Let me just clarify what I’m getting at… IT IS VOLATILE!!!
Needless to say, it’s not something you’d invest in if you want to put your life’s savings somewhere for a few days.
HOW DOES IT LOOK FOR A LONGER-TERM INVESTMENT?
If you look at the factors that one should when looking at an investment, you may be in for a surprise.
1. It’s a finite resource – Only 21,000,000 were created. Once they are all in circulation then that’s it. Sure, it can be broken down to 8 decimal places so there is room for fracturing, but it is estimated that by the time it’s all in circulation the price for 1 bitcoin could be as much as $500,000. Finite = valuable.
2. It is decentralised – Not being linked to any country or currency means that it cannot be seized or frozen by ‘the powers’.
3. It is deflationary in nature – As there is no reserve bank ‘printing more’, it is not diluted in the same way that fiat currencies are.
4. There is rapid acceptance and integration – Not only are some of the world’s biggest companies accepting Bitcoin as an accepted tender, but entire countries are accepting it as legal currency, the most notable of recent times being Japan that legalized and accepted it as a currency in April 2017.
5. The Blockchain – Blockchain technology is being adopted as a data storage and sharing platform that is so safe that the banking sector is snatching up the technology to implement in their transaction model.
All of these points add up to Bitcoin being too much of a game-changer for it not to be considered. But if you are not happy to just read the words written here, let me give you some figures.
The digital currency has come a long way since 22 May 2010 when the purchase of the two Papa John’s pizzas ($25) by Laszlo Hanyecz from another bitcoin enthusiast marked what is believed to be the first “real-world” bitcoin transaction. He paid 10,000 Bitcoin for them, giving a real-world value of $0.0025 per bitcoin.
Since then the value of Bitcoin has increase by an almost staggering rate.
So, in closing, I would say that there are a lot of changes still to come on the cryptocurrency landscape and there are no guarantees that Bitcoin will be the leader indefinitely. That being said, there is no doubt that Bitcoin and altcoins are here to stay and will have such a dramatic change on the way we transact that I will leave you with an equally dramatic comment.
Ignore Cryptocurrencies at your peril.