A cryptocurrency is described as an alternative, digital or virtual currency. It is a decentralized currency, i.e. it is not regulated by any institution, including banks and governments. The creators of a given cryptocurrency decide in advance how much of it is to circulate. It will not be possible to print it as in the case of money. It is a feature similar to precious metals – they are valuable because there is a certain number of them.
What is Bitcoin?
Bitcoin is the most popular cryptic in the world. It was created by the anonymous creator Satoshi Nakamoto in 2009 in order to allow payments from different parts of the world without intermediaries. Nowadays, it is used more as a form of investment than as a means of payment. It has already extracted 17.8 million Bitcoins. Only 3.2 million Bitcoins can still be extracted, as the possible amount in circulation has been set by the developers at 21 million.
Advantages of Bitcoin
1) Popularity – Bitcoin is known all over the world. More and more online shops around the world allow you to pay for your purchases using a cryptocurrency
2) Accessibility – Bitcoin is available in any place where users have access to the Internet or mobile phones. This allows us to pay for products and services all over the world without the need to exchange currency for the country in question.
3)No commissions – When we pay by crypto, we primarily bypass banks and intermediaries, so we don’t have to pay for commissions and bank account maintenance. The Bitcoin system is based on P2P (peer to peer), i.e. without intermediaries.
4)Anonymity – with Bitcoin we can primarily pay for transactions in which we want to be anonymous.
5) No inflation – Bitcoin was created on the basis of the so-called defense mechanism against inflation by setting a maximum number of bitcoins and the impossibility of increasing it.
1) Risk – Owning Bitcoin is primarily related to financial risk. It should be noted that the exchange rate fluctuates over time. In this case, there is a lot to gain or lose from buying bitcoin to hold and selling it. The highest value of bitcoin was recorded in December 2017, where one bitcoin was worth USD 13,800, while the highest drop was recorded in January 2019 – one bitcoin was worth USD 3,501. In August 2019, we recorded a value of USD 10,442. As in the case of other financial instruments, we must remember to buy Bitcoin when its value falls and sell it when its value increases.
2) Lack of control – Bitcoins are in no way regulated by financial and state institutions and have no central bank.
3) Speculative bubble – Many critics of Bitcoin believe that its rates are driven by the enthusiasm of internet users and do not determine the true value of the currency.
4) Anonymity – This feature is both an advantage and disadvantage of a cryptographer. Cryptocurrencies can be used by criminals to finance illegal interests.
5) Irreversibility of transaction – if we happen to order a transfer to the wrong address, the transaction will not be returned. We also have no grounds to request a return of Bitcoin.
What did the cryptocurrencies changed?
Cryptocurrencies are an ever-growing financial instrument. As the Discover Bitcoin service writes, it was only worth a few dollars at the beginning of Bitcoin. People who believed in its potential from the very beginning are probably millionaires today. It is used mainly by young and educated people who know economics and engineering (thanks to that they know the process of bitcoin extraction). For a layman, this topic is still alien – everyone has heard about Bitcoin, but only a few people know the rules of using cryptic. Other crypto such as Ethereum and Litecoin are being developed on the market. Maybe in the future crypto payments will be so popular that we can pay in nearby shops.