Many people have heard of Bitcoin but aren’t quite sure what it is and why it’s so important.
This article explains how Bitcoin works, how it’s used, and how it could affect our economy’s future. Read on to learn more about this revolutionary new currency.
The common phrase Don’t throw good money after bad is attributed to Benjamin Franklin. But it seems that many Americans have a hard time following his advice regarding their finances.
For example, two-thirds of credit cardholders didn’t pay off their entire balance every month in 2016. And if you believe statistics, over 70% of us will be living paycheck to paycheck someday.
It’s not just personal spending that is leaving us in financial trouble either – our federal government has amassed over $20 trillion in debt. It has run deficits every year since 2002 with no end in sight.
Is it any wonder that bitcoin and other cryptocurrencies are becoming so popular nowadays? In fact, as I write this post, one bitcoin is worth about $40,000.
That means that if you had invested just $1,000 in bitcoins seven years ago (when they were first introduced), your investment would now be worth around $400 million.
Of course, there are plenty of risks involved with cryptocurrencies, but more on those later. First, let’s take a look at what exactly Bitcoin is and how it works.
How does it work?
The technology behind bitcoin is called the blockchain. While that term can be confusing, think of it as simply a public ledger.
Every transaction is recorded in a block, and blocks are then linked together to form a chain.
The idea is that nobody can use those same bitcoins again because they’re already accounted for; therefore, once you buy them, they’re yours-unless someone steals them from you.
In fact, blockchain could have enormous potential to reshape global economics and finance by providing an immutable record with which we can verify transactions instead of having to rely on central intermediaries like banks or other financial institutions.
Read about blockchain if you want to learn more about how bitcoin works.
Is it legal?
As a relatively new form of currency, bitcoin is still unknown and unregulated in many countries.
Of course, that’s not to say governments and individuals won’t try to regulate it; indeed, some have tried.
The difficulty lies in trying to explain what it is: Is it money? A commodity like gold or silver? Or something else entirely (the notorious I don’t know might apply here)?
The legalities of bitcoin may eventually become clearer as its popularity grows.
Are there any downfalls associated with Bitcoin usage?
Any new currency is bound to face resistance from those who stand to lose if it becomes widespread.
Take, for example, Bitcoin. Its biggest obstacle at present is that it isn’t yet considered a mainstream currency. If you want to start using Bitcoins now, you’ll have a hard time finding places that accept them as payment.
This isn’t because there aren’t enough people willing to take your Bitcoins. It simply means there aren’t enough businesses that accept them.
Should you invest in bitcoin?
Investing in bitcoin is risky. If you’re thinking to buy BTC, be sure to read up on how it works and how you can buy it.
It would be best if you also considered whether it’s a good investment for your circumstances and risk tolerance level.
As with any other investment, but especially one as volatile as bitcoin, don’t invest money that you aren’t prepared to lose entirely.
Businesses and consumers can benefit from using a currency that is global, secure, inexpensive to use, and protected against inflation.
With no central authority controlling Bitcoins’ production or distribution, it’s also a boon for smaller businesses (and those in economically disadvantaged regions) that don’t have access to conventional banking systems.