Bitcoin has been generating a buzz over the past few years; smashing records and reaching all time price highs. However, opinion worldwide as to the cryptocurrency’s level of acceptability is still divided.
Bitcoin was created to provide an alternative to the Banking system. It is an open accounting system that allows thousands of computers from around the world to track ownership of digital tokens or coins – the Bitcoin – as part of a purchase transaction.
Even though Bitcoin seems a profitable investment tool, its value can be as volatile as the value of the gold, depending on the perceived risk of owning bitcoin as a commodity. Bitcoins are worth more than their weight in gold.
Bitcoins are encrypted for security purposes, but while the coding identifies the currency itself, it does not identify its owner.
What then is pushing the investment value of bitcoin? One driver is increasing demand from developing countries, especially Brazil, Russia, India, China, and South Africa. These countries have weakening currencies, making their local currencies unpredictable and volatile. As a result, it’s becoming increasingly popular to use bitcoin as a natural hedge against paper currency.
Another contributing factor to the rise of bitcoin is the possibility of a trade war between US and China. This may lead to a weakening yuan and capital outflow from China as investors will resort to more stable currencies such as euros.
Here are facts that I think people should be aware about Bitcoins
1. Bitcoin was developed by an anonymous person or group people called Satoshi Nakamoto. In 2016, Craig Wright, an Australian entrepreneur announced in an interview with BBC that he was the inventor of the digital currency though his claim has no verifiable proof.
2. The FBI owns 1.5% of the world’s bitcoins.
3. Did you know that from March 2015 to February 2017 Bitcoin had risen in value by 1289%?
4. Bitcoins are generated all over the internet by anybody running a free application called a Bitcoin miner. This amount is automatically adjusted by the network, such that the Bitcoins are always created at a predictable and limited rate.
5. The money supply for Bitcoins is limited. Only 21 million Bitcoins will ever be created. No one can just print (or mine) more Bitcoins and introduce inflation. Once the number reaches 21 million, no more will be made. There are 16.5 million BTC estimated to be in circulation already.
6. The smallest unit of a Bitcoin is called a Satoshi – which is a 100 Millionth of a Bitcoin, or 0.00000001.
7. Every transaction made on Bitcoin system is recorded. There is a general ledger worldwide that keeps track of all Bitcoin transactions. This ledger is maintained by Blockchain.
8. Every Bitcoin transaction is irreversible. Like cash, once exchanged in a transaction, it cannot be reversed unless the recipient solely decides to return it. In 2016, a bitcoiner accidentally sent $137,000 instead of $5 with no way to retrieve it.
9. One bitcoin transaction consumes 3,994 times more energy than a credit card transaction.
10. Bitcoin became a legal payment method in Japan, April 2017 and could be accepted in over 300,000 stores by the end of 2017
11. Vancouver, Canada has the world’s first Bitcoin ATM.
12. Ethereum with 28.9b and Bitcoin cash with 8.8b market cap are other big cryptocurrencies following bitcoin as of September 2017.
13. Bitcoin transactions are anonymous. You only have a number, but no idea of who the person behind that number is. Payments are made to that number only.
14. Chinese mining pools control approximately 81% of the bitcoins collective harsh rate.
15. Bitcoins are stored in wallets. If you lose the wallet, you lose your money. If you opt for a wallet online and the currency in it gets stolen due to a compromised site, there is no insurance for this. James Howell lost 7,500 bitcoins valued at £4m by throwing his hard drive.
16. Like any currency, Bitcoin is vulnerable to thefts; one of the largest heists in the history of Bitcoin occurred when hackers plundered the illegal bazaar known as Sheep Marketplace. $100 million worth of Bitcoins was stolen from customers.
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Thanks for this information. Those who are ‘Pro-Bitcoin’ speak more about how it’s a good investment tool but rarely about the negative side
It wasn’t intended to be negative rather informative.
Yeah I got that – that’s why i was grateful for the information of knowing both sides. You’re doing a great job. Cheers
Thank you loads 🙂
Hmmmm, so coincidental that I have been getting offers on linked in to trade in Bitcoin. My research made it unsettling. Thanks for this price that puts a clearer picture of the true facts.
However it makes me raise a thousand questions? In my opinion Bitcoin is therefore certainly not for everyone. Also the risk involved is wayyy to high to be bothered. Some guy on had his account hacked by Bitcoin miners of 80,000.
Also why are the creators of Bitcoin anonymous? Why are transactions irreversible . On a good note I do perfectly understand why countries with very unstable currencies would want to trade. As it serves as some sort of hedge. But boy are the risks high!
I’m gonna sit back , sip my coffee and watch for a few years to see what happens. Cheers!!!!
hahaha or perhaps start with $50 ? something small you can afford to risk and then watch it grow or diminish.
Wonderful, thank you so much for the insight. I am glad to have a few.
It’s truly the new hybrid gold/diamond.
Excellent informative neutral article Jules. Well written and a good read to give you both sides of the bitcoin (not just the positive). I’m technologically inclined but I’m still skeptical about jumping into the hype of crytocurrency. It looks to be the way of the future but I’m struggling to see how this will pan out long term for something that folks can’t really put their hands on. We shall see. “
Quite informative, well done Jules.