Cryptocurrencies are becoming really popular these days. On an average they are providing an annual CAGR of 11% to its investors. One of the most popular cryptocurrency is the bitcoin. But what is bitcoin? In simple words, bitcoin is a decentralised cryptocurrency that offers lower transaction cost than any other payment platforms. It was created in January 2009 by a person named Satoshi Nakamoto. Bitcoin is stored, created and distributed through blockchains. To simplify this think blockchains as a collection of blocks and each block contain a collection of transactions. As these blocks are similar to each other the transaction details remain anonymous, so you can know the cheapest way to buy bitcoin through this. Bitcoins are mostly used for transactions that require privacy.
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Features of cryptocurrency:
- It is known as the first decentralised digital currency since it works without the involvement of a central repository system.
- Transactions are fast and convenient than traditional banking systems.
- Transactions can be achieved by even zero or very low transaction charges.
- No tax on any purchases.
- Each transaction is a public record.
Barter for Bitcoins:
- Purchase on exchange: people can buy or sell bitcoins using different currencies at “Bitcoin exchanges”.
- Digital transfers: The currency can be easily transferred using mobile or computer systems.
- Mining: Various apps including puzzles solving applications and games allow people to “mine” bitcoins.
Covid and Bitcoin
It has been now more than 2 years for the people to remain in an online world. As Covid hits India, people got stuck with their laptops and phone in their room which make them comfortable to do their each and every work online. Covid brought financial threat with it which compelled people to secure their money by investing in some good source by just remain in their room. Bitcoin proves to be a good source for them as it doesn’t include any intermediate and it is very difficult to do any type of corruption in transfer of Bitcoin.
Indian government and Bitcoin
Indian government is strictly taking measures to ban bitcoin and other cryptocurrencies in India because of its negative implication on youths specifically. Government is continuously working with reserved bank of India to introduce centralised cryptocurrency of India. After the news that Indian government is going to ban cryptocurrencies broke out, there was a sharp decline in the price of bitcoin.
Merits of bitcoin
There are lots of criticisms on bitcoin and other cryptocurrencies but this industry is useful in many ways.
- Accessibility and Liquidity: As bitcoin is a decentralized digital currency it is easily accessible to anyone. It makes foreign transactions much easier.
- User anonymity and privacy: As every transaction done through bitcoin remains anonymity it helps in securing the privacy of both the transaction as well as the person.
- Independent from central authority: bitcoin is a decentralized currency; hence it is not regulated by any government or banking institution. This reduces the risk of having power in a few hands.
- High returns: bitcoin has given an annual return of about 150% to its investors. Therefore it is a good investment opportunity.
Demerits of bitcoin:
Although bitcoin as many advantages it also have some demerits which get us thinking about bitcoin as an investment opportunity.
- Volatility: bitcoin is a highly volatile asset which makes it a very risky investment option for normal investors. It is also influenced greatly by headlines and tweets which add to its cause of volatility.
- No government regulations: As seen earlier, bitcoin is a decentralized currency that is independent from any central regulations. Thus it does not come with any legal protection from the central authorities.
- Irreversible: every bitcoin transaction is anonymous in nature. Hence no transaction can be reversed. So nothing can be done if you enter the amount wrong in the transaction.
- Limited use: in spite of increasing popularity of cryptocurrencies and bitcoins these digital coins are still not accepted as a medium of payment by many companies.
Future of bitcoin:
Bitcoin has given a massive return for the past ten years to its investors. The main disadvantage of bitcoin is the non-regulatory nature of the coin. For this reason many countries have taken countless steps to regulate bitcoin and other cryptocurrencies. Over and all, with proper regulations and less fraudulent bitcoin and cryptocurrency as a whole has a very bright future in terms of an investment instrument as well as a medium of payment.