Bitcoin investing, a goldmine or landmine?

Fredrick Awino
02.06.2022
158 Views

Cryptocurrency and bitcoin are almost synonyms to many. I can confidently say that so  many people even today still find it hard to differentiate the two. Even the enthusiastic people who are thinking really hard to throw their hearts into crypto investing will still talk about bitcoin to mean all the variants of crypto coins.

WARNING: Investing in crypto, or other markets, can be of a high risk for your savings. Do not invest money you cannot afford to lose, because there is a risk for losing all of your money when investing in crypto, stocks, CFDs or other investments options. For example 77% of retail CFD accounts lose money.

To make it simple and straightforward, bitcoin is a cryptocurrency but cryptocurrency is not bitcoin. in short,, there are other digital coins that have come up after the initial launch of bitcoins on Jan. 3, 2009. Just to mention, A pseudonym Satoshi Nakamoto has been used tin references to the creators of bitcoin.

While bitcoin was the first crypto  in the market, new crypto coins which are collectively refereed is as altcoins have emerged and continue to grow.  Therefore, whether you are just interested in knowing various investment options in crypto or seriously interested to start your crypto investment journey, knowing what fortunes will come your way from bitcoins is a priority.

Getting started with Bitcoin knowledge

Bitcoin is a digital currency, or a virtual currency is a kind of money that is virtual. Basically, it is the online version of cash. Although you may utilize it in purchasing products and services, just a few shops accept it because even some nations have banned it.

Bitcoins are used for electronic transfers and purchases. For instance, you can use it to pay the merchants and friends. When you make a purchase, it is immediately logged digitally on a transaction tracking time of purchase. The transaction log is an audit trail as it has every information of the bitcoin transaction. The digital transaction is blockchain.

Bitcoin utilizes peer-to-peer technology in operating with no central authority. In short, it uses decentralized and not central systems such as banks. Besides, issuing of bitcoins and managing transactions takes place in the network. It is also open-source, and the design is public. No one owns or even controls Bitcoin, as any person can take part.

Bitcoin is the first decentralized currency globally. The digital asset utilizes public-key cryptography in sending, signing, and recording transactions over the Bitcoin blockchain. As said earlier, all this takes place without a central authority oversight.

The way Bitcoin Cryptocurrency Investment works

Every bitcoin is a computer file stored in a digital wallet application on a computer or smartphone. People can send you bitcoin through your digital wallet. Also, you can send bitcoins to other individuals. However, every transaction is recorded on the blockchain, a public list. The recordings help in tracing Bitcoins’ history. Thus, stopping individuals from spending the bitcoins they do not own or even making copies.

The following are the main ways of getting Bitcoins:

Created using a computer

Purchasing bitcoin using real money

Sell things, then let people pay you using Bitcoins

Bitcoin runs its blockchain, which excludes the need for assistance from a third party to store value and facilitate transactions. Bitcoin mining is the magic of the Bitcoin network. The crypto also runs on a proof of work (PoW). Also, the bitcoin miners run computer equipment that searches for complex math puzzle answers. The miners who solve the puzzles get a reward in BTC form.

In terms of usage, bitcoin transactions take place on the internet. Thus, no need for physical coins as well as bills. People can easily transfer Bitcoins to the digital wallet of other individuals without a bank. However, many people prefer to use it as a form of investment. Their end goal is to make a profit.

Processing or Mining of Bitcoin

Mining is called a distributed consensus system utilized to confirm the pending transactions. It does so by including them in the blockchain. Mining is a good system because it enhances a chronological order in blockchain while also protecting network neutrality. Also, it allows varied computers to agree regarding the system state.

In confirming, transactions must be in a block fitting very strict cryptographic rules verified by the network. The rules play a major role in preventing the prior blocks from modification since, by doing so then, they can invalidate the subsequent blocks.

In Bitcoin, mining develops the equivalent of a competitive lottery. This prevents every person from easily adding new blocks consecutively to the blockchain. Through this, no person or group can control what is in the blockchain or even replace some parts of the blockchain in rolling back their spending.

The Things a Trader Should Consider before investing in Bitcoin

Just like any investment across the world, such as real estate, crypto comes with its risks as well as potential rewards. However, compared to traditional investments, including gold, cryptocurrency is risky.

The following are some of the things you should consider before investing:

  • Cryptocurrencies are volatile, meaning that they are prone to market crashes and bull runs.
  • One should not invest all his or her life savings in the Bitcoin market. You know anything can happen, and you should have some savings apart from crypto that can help you sort out yourself in case of an emergency.
  • Cryptocurrency such as Bitcoin is somehow a way of gambling. Thus, it means that you should just invest a small amount of disposable income because, in some cases, you can lose all your income.
  • Just like the traditional assets such as purchasing land, people should consider Bitcoin as a long-term investment in providing a chance to make money.
  • You should not supposed to invest more than you may afford to lose
  • Any person who does not have much money left after expenses should not think of investing in Bitcoin. Instead, the person should focus on saving money.

Why People Like Investing in Bitcoin

As I said earlier, Bitcoin is a decentralized digital currency. Most people love and prefer investing in Bitcoin as the banks or even the government do not control it. Moreover, one has the opportunity of spending Bitcoins anonymously. Even though the transactions are recorded, no person knows the other person’s account number uncles you inform them of.

Is Bitcoin a Secure Cryptocurrency Investment

Yes, bitcoin is very secure. Every transaction that takes place is publicly recorded. The issue makes it difficult for people to copy, spend the bitcoins they do not own, and make fake bitcoins. However, there is also a possibility of losing your Bitcoin wallet or even deleting your bitcoins. In the past, there have been thefts from the websites that tell the traders to let them store their Bitcoins remotely. It means that you should always be careful when trading in bitcoins and ensure that you are performing a legit transaction.

Author Fredrick Awino