Bitcoins is a cryptocurrency and also a payment system not known to so many. There is so many buzz about bitcoins today and a lot of people are investing in it while some careful others are worried and careful. Some people have asked me personally to explain what bitcoins is and how secure or reliable it is, and if it is a credible investment.
I am no expert with bitcoins, I had to learn a lot I know today about it. So I decided to chronicle some of my findings to help people know more about it, I’ll try my best:
Bitcoins is said to be the first cyrptocurrency, and was first introduced on 31st October 2008 by a programmer called Satoshi Nakamoto. It was introduced as peer-to-peer transactions between users, verified by network nodes and stored and recorded on blockchain. It was created as a reward for users for computing power and recording bitcoin transactions into the blockchain – which is referred to as mining. Bitcoins are simply created through this process of mining.
There are many bitcoin fans who simply share the ideology that digital currency is the future – I totally agree with that. The idea is that if truly digital currency is the future, then which one will, if not bitcoins? It is great to know that there are different ways to earn or own a bitcoin.
How to Earn Bitcoins
- Mining: Bitcoin mining is the process through which bitcoins are created; it involves solving a computationally difficult puzzle to discover a new block which is usually added to a blockchain. These bitcoins are given as a reward to such miners. Generating bitcoins is on the decrease over the years – the more bitcoins are generated, the more the difficulty in the mining process, to combat with the level of difficulty, miner now uses hardware like Application-Specific Integrated Circuits, Graphic Processing Units, etc.
- Receiving it as payment: Another good means to earn bitcoins is to accept it as a means of payment for products or services rendered. Some organizations are not accepting bitcoins as a means of payment, anyone can. One popular among these organization is Amazon. It is very easy to accept bitcoins once you do an online business, all you need to do is add the payment options among others.
- Buying and Selling: Buying and selling of bitcoins is a wonderful means through which people have reaped a fortune from bitcoins. It is a simple business; you buy when the prices are low and sell when it is high. Some others buy and keep for a long time before selling and they make money from the increase in the value of the coin. Right now there is a great demand for it, selling is just a good business.
- Interest Payment: Receiving interests on bitcoins is good way to earn. Some interest through lending people personally with interest, others lend to organizations through a website that gives interest on donations, I must warn about scammers – a good example of aimbtc which just ran away with people’s investment. Some others also earn interest through a peer to peer donating system, and they earn good interest through networking, a good way to earn I must confess.
- Gambling: Gambling is the last option to earn bitcoins that made the list, even though it is not the best way to earn bitcoins. There are lots of Casinos that offer jackpots, betting, lotteries etc to bitcoin players. I strongly advise to not involve with this practice – I shared this just for the singular purpose of knowledge.
Risk attached to bitcoins as an Investment
According to the U.S. Securities and Exchange: “A new product, technology, or innovation – such as Bitcoin – has the potential to give rise both to frauds and high-risk investment opportunities”.
Bitcoins is the first cryptocurrency in the virtual world; it has gained much attention, and acceptance. However it must be noted that it lacks a third party (bank or any central authority) control and do not enjoy any government backing. It is simply not a legal tender. Below are highlighted risk attached to it:
- It is still in an Experimental Phase: The idea behind a digital currency is a great innovation and also a recent invention with no track record of any credibility. Bitcoin with other cyrptocurrencies are still evolving; this is a huge risk and should be avoided by those averse to taking risks.
- It Lacks Regulation: Different approaches and means have been applied to the use of bitcoins in different places – the absence of a well structured and uniform regulation for now makes it more risky.
- Theft: The security of bitcoins for now is still a course to worry; once a bitcoins wallet is hacked there are limited options or nothing to do about the recovery. This is a big disadvantage which can be prevented only if it is stored in a computer which is not connected to the internet.
- Fraud: Investors should be very mindful of fraudsters, when you are promised unimaginable high returns on investments, when it is too good to be true, when there is an unsolicited offer of sale, when there is an urgent offer for people to make investments etc. All these are great signs of fraud.
- No Consumer Protection Right: People sell it at their discretion without any form of considerations and general control to protect the buyer’s rights. If bitcoins are sent to the wrong wallet, there is virtually nothing anybody can do to retrieve it. It is therefore advisable to trade it only with trusted people.
Bitcoin is the investment and financial asset that performed better this year than any other currency, commodity or assets generally. Forecast have it that it could rise to over $1000 dollars to a bitcoin before the end of 2016 and early 2017. Bitcoin constitute a new niche that is driving major innovation in the finance sector. It is no doubt that this currency has all it takes to keep in the archives traditional method of finance – as many believe and I also do that digital currency is the future. However this form of finance still comes with some risks that must be calculated before it can be a credible form of investment. My advice is that anyone averse to risk should stay away from it for now.