What to know before you start with Bitcoin

What to know before you start with bitcoin?

The latest that’s been going on about cryptocurrencies, and Bitcoin, in particular, has garnered a considerable amount of attention from the public as well as Governments. Some look at it with awe and wonder and some with skepticism, but unlike before when it was kept well under wraps, today it is being discussed by everybody and governments are forced to start paying attention to this and do something about it.

There are of course some ambiguities concerned with Bitcoin — about what it is, what it does and whether it’s going to stay or dissolve. Here is some basic information that you must know before you decide to dive in.

Bitcoin Basics

We all know what Bitcoin is, where it comes from and what it’s used for. But many might not know is of its nature. Bitcoin’s value today has increased drastically and there have been cases where people invested in Bitcoins and became millionaires. However, it should be noted that the true nature of Bitcoin is that it is highly volatile. The price of Bitcoin can either increase or decrease unpredictably because of it at the end of the day, it is a new currency and investment market and is still in its experimental stages.

Trading in crypto or virtual currencies has surged due to extraordinary returns. For example, Bitcoin which is the oldest and the most popular virtual currency has given returns of over 30 times over the past four years. The value of the currency surged from $100 in June 2013 to $3,025 in June 2017. Similarly, Ripple, a cryptocurrency based on inter-bank settlements, has given 200 per cent returns over the past three months ending July 31.

All of this tells us that cryptocurrencies give high returns and may seem like a high potential investment option, but as mentioned before they are also highly volatile. One reason why their value has risen is that of the low returns given by other markets such as the real-estate, fixed deposits, and gold. The currency should be seen as a high-risk asset because of the illiquid market.

We have also heard about how Bitcoin is very secure and completely anonymous. While this is true for its design and protocol, it is still only as secure as you make it — don’t give your private keys to anyone, and don’t fall for scams! The anonymity of Bitcoin covers only on the identity of the user and not on the transactions and balance, which are public and are permanently stored in the form of a blockchain. That is why Bitcoin addresses should only be used once. Another important thing to know is that these transactions are irreversible. They can only be refunded by the receiver and that makes it all the more important that you engage in transactions with people you know and trust or who are well-established.

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Legal Status of Bitcoin

There are many who have started using Bitcoin for their normal transactions. However, the risks associated with it still remain. These risks arise because it is not regulated by the government and central banks (Japan, however, has completely legalised it). And so if you’re robbed of your money, or if you have lost money from your account, there is nobody to complain to as there is no legal regulator yet. Considering these issues and the rising usage of the cryptocurrency in India, a recent article in Business Today has cited that the government formed a committee earlier this year to regulate the market. The report is still in process.

Why Use Bitcoin?

  • Bitcoins can be used to buy merchandise anonymously. You can use it for things as simple as retail shopping while your identity remains hidden.
  • International payments are easy and cheap because Bitcoins are not tied to any country or subject to regulation.
  • Bitcoins can simply be used to send money from one person to another, just like how you transfer your money from your e-wallet to that of someone else.
  • Small businesses may use them as their primary mode of the transaction because there are no fees involved in the transaction.
  • Some people just buy Bitcoins as an investment, hoping that they’ll go up in value.

Future of Bitcoin

Nobody can predict what the exact future of Bitcoin is going to be. Governments are worried about their lack of control on the market and currency and are looking at regulating it. Once regulated, it can resolve several issues, like fake currency, security issues and its illegal use. With that being said, the high potential of cryptocurrencies cannot be denied and Bitcoin is already facing stiff competition from other, newer cryptocurrencies such as Ethereum and Ripple.

Bitcoin still has a long way to go, but with the public slowly becoming comfortable with digital currencies and its use and with merchants also looking at its various advantages, the outlook seems bright. With every new cryptocurrency, there have been new developments. Several experts have seen great potential in the concept of Blockchain technology which is behind Bitcoin.

The future of Bitcoin, however, looks more promising than ever. Its usage and value are rising and there are already other cryptocurrencies gaining popularity. The technology it uses, Blockchain, is also developing and has expanded its usage to serve other purposes.

When the general public talks about bitcoin, there is usually some sort of doubt and confusion associated with it (more so because there are many scams regarding it you should steer clear of). Hopefully, this guide should serve as a ready reckoner for such instances!

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