Since its advent in January 2009, Bitcoin’s presence in the world has increased quite dramatically. Conceived as a cryptocurrency and digital payment system, it is also beginning to take on a more physical form.
Now, with several thousands of merchants and vendors accepting payments in bitcoins and ATMs popping up, Bitcoin is quickly becoming an influencing economic force as well in various nations.
Here are some amazing facts about Bitcoin that should know:
Bitcoin is a real currency
Those who think bitcoin can’t be used to buy anything real are either stuck in the past or just spreading misinformation. Many independent businesses accept bitcoin, but even some big brands are getting in on the act.
Bitcoin transfers are fast and flexible
While many financial institutions charge you or take days to process transactions, bitcoin allows transfers from one account to another almost for free and at will. You must have some technology, of course, and you must already have your money in bitcoin form. But there are no middlemen, and users are able to transfer value more quickly and without costly processing fees.
Digital currencies are here to stay
While bitcoin isn’t perfect, its potential has won over many of the biggest names, even Nigeria’s central bank is beginning to recognise its value. Even if volatility in bitcoin prices is the norm and competition is heating up, there clearly is a future for digital currencies in some form.
Bitcoins leave a trail
While there is some level of anonymity in the world of bitcoin, some investors misunderstand how the currency works. That stems from the fact that the digital currency uses a widespread network of users who all keep transaction ledgers using blockchain technology, instead of a central institution of record. But the important thing to remember is that the long chain of transaction histories is shared, encrypted and independently verified by a disparate group of users — not simply made up out of thin air or subject to deletion at a whim.
Bitcoin has a long way to grow
While many techies are excited about the prospects of bitcoin, everyone admits the currency is in its infancy. Merchants are slowly learning the potential of connecting with bitcoin, and individual consumers are slowly becoming more comfortable with digital currencies; the learning curve is encouraging.
A fractured future
Adding to the volatility and the prospect of losses is the fact that even if digital currencies become mainstream, there’s no guarantee that bitcoin will, despite being a first mover. It’s not just competition from Ethereum and others, either; the bitcoin community itself is fractured about where to go from here and just saw a splinter group create a competing cryptocurrency known as Bitcoin Cash. After all, BlackBerry Ltd. may have kickstarted the smartphone revolution almost 20 years ago, but it isn’t exactly sitting pretty these days.
Bitcoin isn’t truly frictionless
While it’s true that bitcoin-to-bitcoin transfers are theoretically easy, it’s an error to think participation in the market is free or without frictions. For starters, users have to exchange real-world naira, dollars or euros for the currency, and most third-party exchanges charge a fee for that. Furthermore, many merchants “accepting” bitcoin still don’t actually deposit bitcoin into their accounts — they use a similar third-party exchange to instantly convert bitcoins back to dollars, which often comes with a cost.
The uncertainty bitcoin faces as a new technology is not unique. However, the fact that bitcoin is easily linked to our currency means the ebb and flow of sentiment is painfully obvious — and may make volatility even worse.
Again … bitcoin has a long way to grow
Some of the fraud risks and inefficiencies may resolve over time. Surely better systems and consumer education will help in the long run, but that begs the question of why you would want to buy now when the digital currency remains largely on the fringes of investing and commerce.
If you like taking massive risks on things like emerging-market penny stocks, I guess bitcoin is no big deal. But for the typical investor, there are many reasons why it makes sense to wait until the market is established and stable rather than chase potential reward at a massive potential risk.
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