If you’ve been following the news, you undoubtedly know some things about Bitcoin by now, but the question remains about why some finance experts believe in cryptocurrency and others reject it?
With the continuation of Bitcoin news and its great price fluctuation, as well as being a new class of assets even if some do not consider it a currency in the usual sense, some things emerge that you should know, the first of which is that Bitcoin is a cryptocurrency, and the second is that the value of one of them is more than 50 thousand dollars. Although the price fluctuates dramatically day after day.
The third thing is that many large companies in the world have invested in Bitcoin, including electric car manufacturer Tesla. However, if you are like many people ignorant of other things, including what exactly cryptocurrency is, how it works and whether it is a safe way to invest your money, here is the following information:
History of Bitcoin
Bitcoin was invented in 2009 as a form of digital currency. Unlike paper money or debit cards, which represent the paper money a buyer keeps in a bank, Bitcoin has no physical form. It is stored digitally, which provides more security than checks, paper money transactions, and even other digital transactions.
As of Tuesday morning, Bitcoin opened at a level of more than $ 57,000, while the price of the cryptocurrency in 2010 was only about 8 cents per bitcoin.
Bitcoin is a leader in the world of cryptocurrencies, but today there are more than 6,700 cryptocurrencies traded on the public markets, according to CoinMarketCap.
Although Bitcoin and other cryptocurrencies are used to exchange goods and services in the private market, they are not considered a legal market like the US dollar and other fiat currencies.
Some of the most popular cryptocurrencies today include Ethereum, Bitcoin Cash, and Litecoin, which you can buy through PayPal. Other less popular cryptocurrencies are called altcoins, as one of the most popular alternative currencies is Dogecoin, which became famous through the tweets of billionaire Elon Musk, who recently tweeted: “Buy some Dogecoin for lil X, so that he is a new believer in the cryptocurrency.” This is meant by his son.
What is meant by cryptocurrency and cryptocurrency?
Bitni.com founder Rob Zell described it as follows: “A cryptocurrency is a completely decentralized peer-to-peer electronic money executed by means of cryptography.”
Due to their nature, cryptocurrencies are not regulated, which carries with it the risk of market volatility and the loss of investors. However, the security risk and the risk of fraud when using Bitcoin and other cryptocurrencies are greatly reduced.
Also, due to the extremely secure nature of transactions, purchases cannot be tracked. This means that individuals can use cryptocurrencies to purchase illegal or highly regulated goods, including certain classes of drugs or firearms.
Cryptocurrencies use encryption technology to keep transactions and currencies safe, and cryptography, or cryptography, is the practice and study of secure communication techniques in the presence of third parties called liabilities.
Dr. Alexander Shepilov, CEO of iModX, a blockchain-based marketplace, explained that the most common form of encryption is the use of tokens to send messages securely between two people, according to Yahoo Finance, which was seen by Al Arabiya.net.
How does blockchain work?
Cryptocurrencies are traded via blockchain, or blockchains, which Shepilov describes as “a way for multiple computers to reach consensus on a set of information.” “The most common use of blockchain technology is to create a ledger for financial transactions between many individuals,” he says.
The blockchain works via cryptography, whereby each block in the chain is linked in an encrypted form to the previous part. Each block of the chain is stored and shared over a peer-to-peer network, similar to file-sharing torrents. Blocks are tamper-proofed encrypted. This makes it extremely difficult for hackers to modify or lock down, according to Zell’s description.
Thanks to blockchain technology, Bitcoin and other cryptocurrency transactions are inherently more secure than other types of digital transactions, such as online banking, money transfer through digital wallets, or peer-to-peer payment services. But it is important to emphasize that all of these services use the latest encryption technology to protect your money digitally.
This does not mean that bank money is not safe. Most banks offer fraud protection so that if your account is hacked, the bank will return your lost money.
On the other hand, there is a huge problem due to the massive cryptocurrency protection system, which is that if you lose your password or forget it, you will never be able to recover your coins unlike bank accounts.
Understand why cryptography is so dangerous
Although your investment in encryption is likely to be “secure”, that does not mean that it is “secure” in any way. There are two elements that make cryptocurrency more risky than keeping cash in a bank account, namely: market volatility and the lack of government insurance and regulation.
For example, in the US market, when you keep your money in a bank account, it is insured by the Federal Insurance Corporation (FDIC) for up to $ 250,000 per depositor, per account category, and per bank. This means that if you have your own checking account with $ 100,000, a savings account with $ 50,000, and investment certificates worth $ 100,000, all within a single FDIC-insured bank, your money is all protected by the insurance organization on Federal deposits. And if your bank goes out of business, you won’t lose your money.
Conversely, if something happens to the cryptocurrency company, you may lose all of your investment.
Cryptocurrencies, like stocks and other investments, also tend to be very volatile. When you hold cash in a bank, the value of your money will fluctuate marginally based on inflation or deflation. But it is very unlikely that you will lose – or earn – large amounts of money overnight.
“Cryptocurrencies tend to be very volatile … in one day, a cryptocurrency can move 20% or more. Some of the newly invented digital currencies can jump 40 times in the first few months,” says Zell.
He added that there is another concern for those looking for a safe haven for their money. “Sometimes, the newly created currency will be a complete fraud and the founders will take the money from the investors and disappear, leaving them with a worthless token,” says Zell.
Can you use Bitcoin to buy things?
Currently, Bitcoin and other cryptocurrencies are inherently traded like stocks and the currency used to exchange goods and services. However, high transaction fees and volatility of digital currencies prevent it from being widely adopted as a currency.
You can use Bitcoin and other cryptocurrencies to make purchases, but they aren’t always perfect.
Shepilov adds that the vast majority of cryptocurrencies at the moment are treated as assets rather than currency.
“They are speculated by investors who assume that the assets will increase in value over a long period of time,” he adds.
However, even though people have made millions through their Bitcoin investment over the past year, crypto may not be the best choice for novice investors or those with low risk.
“Cryptocurrencies are unregulated assets with a high degree of volatility and limited government oversight, and the majority of cryptocurrencies lose most or all of their value very quickly, with more than half of them failing in the first four months,” Chepelov warns.