What is Electronic Currency?
Sometimes referred to as Crypto-Currency, Cryptocurrencies are a subset of alternative currencies, or specifically of digital currencies. Bitcoin became the first decentralised cryptocurrency in 2009. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, as a blend of bitcoin alternative.
A cryptocurrency is a medium of exchange like normal currencies such as USD, but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography. Cryptography is used to secure the transactions and to control the creation of new coins.
Put another way, cryptocurrency is electricity converted into lines of code with monetary value. In the simplest of forms, cryptocurrency is digital currency.
Unlike centralised banking, like the Federal Reserve System, where governments control the value of a currency like USD through the process of printing fiat money, government has no control over cryptocurrencies as they are fully decentralised.
Most cryptocurrencies are designed to decrease in production over time like Bitcoin, which creates a market cap on them.
That’s different from fiat currencies where financial institutions can always create more, hence inflation. Bitcoin will never have more than 21 million coins in circulation. The technical system on which all cryptocurrencies are based on was created by Satoshi Nakamoto.
While hundreds of different cryptocurrency specifications exist, most are derived from one of two protocols; Proof-of-work or Proof-of-stake. All cryptocurrencies are maintained by a community of cryptocurrency miners who are members of the general public that have set up their computers or ASIC machines to participate in the validation and processing of transactions.
If you are about to explore Bitcoin, there are a few things you should know. Bitcoin lets you exchange money in a different way than with usual banks. As such, you should take time to inform yourself before using Bitcoin for any serious transaction. Bitcoin should be treated with the same care as your regular wallet, or even more in some cases!
Securing your wallet
Like in real life, your wallet must be secured. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can provide very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money. Read more about securing your wallet.
Bitcoin price is volatile
The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Consequently, keeping your savings with Bitcoin is not recommended at this point. Bitcoin should be seen like a high risk asset, and you should never store money that you cannot afford to lose with Bitcoin. If you receive payments with Bitcoin, many service providers can convert them to your local currency.
Bitcoin payments are irreversible
Any transaction issued with Bitcoin cannot be reversed, they can only be refunded by the person receiving the funds. That means you should take care to do business with people and organisations you know and trust, or who have an established reputation. For their part, businesses need to keep control of the payment requests they are displaying to their customers. Bitcoin can detect typos and usually won’t let you send money to an invalid address by mistake. Additional services might exist in the future to provide more choice and protection for the consumer.
Why Invest in Bitcoin?
If you thought this way, in doing so you unfortunately would have been wrong. You would have passed up the chance at what’s been a truly historic profit run, possibly because you may fear things that you don’t understand yet… possibly because you’re afraid of things that are new.
YES, I’m talking about Bitcoin.
In times of economic uncertainty, Bitcoin has so far proven a safe haven for investors, just as has always been true with gold.
Bitcoin has also proven to be more than just a fallback because, unlike gold, when stocks are rallying, Bitcoin rallies too.
Trailing the last 12 months (2016/17), the S&P 500 is trading in negative territory. SPDR Gold Shares (NYSE: GLD) have climbed 14.4%. Bitcoin is up 74.9%.
Trailing five years, the S&P 500 is up 68.8%. Gold is down 26.5%. Bitcoin is up 24,900%. And yes, that’s a comma, not a decimal point.
In other words, when stocks go up, Bitcoin goes up. When stocks go down, Bitcoin still goes up. At least that’s how it’s been for the past half-decade or so.
Put quite simply, this lack of correlation with the dollar makes Bitcoin a particularly attractive investment in an environment where all the conventional vehicles have become inflated. None of this is to suggest Bitcoin has infinite value, but after years of traditional investors channelling their inner circle, screaming doom, the currency just keeps chugging along.
Your Bitcoin Wallet
A “wallet” is basically the Bitcoin equivalent of a bank account. It allows you to receive bitcoins, store them and then send them to others. There are two main types of wallets, we store fiat cash in a physical wallet, and bitcoin works in a similar way, except it’s normally digital.
A software wallet is one that you install on your own computer or mobile device.
As you can imagine there are several electronic wallets to choose from, the one I use is COINBASE.
Coinbase has been one of the most awe-inspiring innovations since the Internet came into existence.
Coinbase technology basically allows everyone to hold and make transactions as strangers but in a completely transparent manner. There is no mediator in between two people making the transaction, and the entire process becomes easier and cheaper.
This concept can be applied to the entire digital world making any kind of exchange/transactions secure (not just bitcoin).