Bitcoin – demystifying the high-profile cryptocurrency

Goodbye fiat currency. Welcome cryptocurrency! The terrain of virtual currencies offers what invited individuals are looking for, digital gold that meets important parameters such as data protection, cost efficiency, liquidity and increased transaction speed.

Just as Airbnb revolutionized the hospitality industry and digital photography revolutionized the film-based business, healthy optimism pervades the currency world as the digital currency continues to make unmistakable advances in payment platforms. Bitcoin is undisputedly recognized as primus inter pares.

In terms of market capitalization, it tops the hierarchy of digital currencies, followed by competing cryptocurrencies like Ethereum, Tether and Binance Coin. Although this article would be largely limited to Bitcoin, the principles covered here can also apply to other virtual currencies.

The revolution of money as we know it began with Bitcoin when the Internet of Information was exploited to support and sustain the Internet of Money. Bitcoin has survived a lot of beatings, ridiculed as a speculative bubble, an untenable gigantic Ponzi scheme and fool’s gold.

Even so, it is legal to use Bitcoin not only in the world’s largest economy, the United States, but also in South Africa, Mauritius, Singapore, Japan, Canada, El Salvador, and the European Union. In fact, El Salvador declared Bitcoin legal tender two and a half weeks ago and is now used alongside the country’s main fiat currency, the US dollar.

Due to potential links with the criminal world, particularly illegal, habit-forming drugs and terrorism, countries such as Morocco, Algeria, China, Russia and Vietnam have banned the use of Bitcoin in environments under their sovereignty. In the article titled “Bitcoin – Africa Could Be the Next Frontier for Cryptocurrencies,” writes Pavithra Rao; “The most important Bitcoin countries are Botswana, Ghana, Kenya, Nigeria, South Africa and Zimbabwe.”

In 2009, a single figure or group of FinTech enthusiasts published the whitepaper on Bitcoin under the Japanese-sounding alias Satoshi Nakamoto. This was the origin of the development of a digital currency that enables real-time transactions without the need for the inefficient and costly intermediary platform that is normally required to ward off double spending.

Due to decentralization, this currency is not tied to the unfavorable policies of a central bank and could be effective in combating hyperinflation. Bitcoin fends off inflationary pressures that typically come from printing more money as a quantitative easing strategy, either as part of a stimulus package to stimulate the economy or to fund governments’ procurement strategy.

Bitcoin investors don’t have to worry about politically driven currency devaluations and unjustified bank account freezes. This virtual currency is also attractive for a third of the world’s population, men and women who do not have a bank account due to structural problems now have a platform that offers them inclusion. In contrast to the fiat currency, perhaps the greatest advantage of Bitcoin is that it offers its owners a form of privacy that would never be available in normal banking infrastructure, backed up by the policies of sovereign central banks and individual banking companies.

Could there be problems with hacking, digital theft, identity theft, liquidity and fungibility, volatility and double spending? The core investment principle, embodied by the hackneyed stereotype of yesteryear, “cut your coat after your dress,” widely adopted by risk-averse individuals, applies to savvy investors in the evolving landscape of digital currency.

Resist the temptation to buy more than you can afford to lose. The Bitcoin uses blockchain technology to track and validate transactions in the form of a fraud-proof database. This huge but decentralized public protocol is copied to all network participants.

Since duplicates of all transactions are visible to everyone, it would be a miracle to hack millions of computers across the globe at the same time. Bitcoin theft is not a remote possibility. It happened in the past.

All you have to do is hack into the digital exchange platform. Vigilant investors protect themselves by moving their money from such a virtual marketplace to digital wallets with private keys to prevent cybercriminals from entering. The only downside to this is the possibility of losing all of your money

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if the decryption keys are misplaced.

Liquidity is essential for any fixed asset. Although empirical data suggests stocks are more liquid than Bitcoin, they are nonetheless liquid and can be sold in fractions. A bitcoin is divisible into one hundred million units and each unit can be further divided into eight decimal places.

An investor can deposit their bitcoins in a reputable exchange vehicle and cash would be deposited into their account. Due diligence would require investors to consider the level of network and service fees. Some merchants accept bitcoin.

This is how fungible this cryptocurrency is. The key feature of blockchain technology is its efficiency in avoiding double spending. From the origin of this revolutionary technology, a record of all transactions was kept. Existing cryptographic protocols require that every time the universal ledger is updated, all digital wallets are updated.

Bitcoin is likely to remain volatile. However, this has not deterred investors because, like gold, the upside potential of volatility always translates into substantial gains for them, and any downside is usually followed by a period of resilience and appreciation.

The cryptographic keys and blockchain technology through their indelible virtual trace make it difficult for hackers to steal someone’s identity. Twelve years since it was invented, Bitcoin is still around, rock solid, unwavering and increasingly popular. It remains a trusted cryptographic platform for digital payments. Two years after the invention of Bitcoin, sitting with pretty much a million Bitcoins and convinced of the impregnability of Bitcoin, Nakamoto wrote, “I’ve moved on to other things.”

However, heavy hitters and influencers have emitted negativity in the financial world. Three years before his centenary, Charlie Munger, an American billionaire who currently serves as vice chairman of Berkshire Hathaway, described bitcoin as “contrary to the interests of civilization” and continued, “Of course I hate bitcoin success and I applaud it not a currency useful for kidnappers and blackmailers … And neither do I like to shuffle a few extra billions and billions of dollars on someone who has just invented a new financial product from scratch. “

People who have worked hard to build stable and growing conventional financial empires seem eternally confused by the fact that ‘Satoshi’, through his ingenuity and creativity, created his ‘giant empire’ ex nihilo. Munger’s boss Warren Buffett said, “I don’t have bitcoin. I don’t own any cryptocurrency, I never will. “

While Bill Gates denounces the fact that mining Bitcoin is not environmentally friendly, Microsoft’s founder appears to be a little more accommodating. He said, “I don’t own Bitcoin, I don’t sell it, so I take a neutral view … Bringing money into digital form and reducing transaction costs is something the Gates Foundation is doing in developing countries.” Over the past 12 years, Bitcoin’s value has risen at lightning speed from $ 0.30 in 2009 to almost $ 40,000 in 2021. Bitcoin’s growth has been extremely impressive. Hyperoptimistic forecasts put the value at half a million US dollars by 2030.

What are the problems with Bitcoin? Because of the privacy it offers, its greatest weakness is that it provides integrity-impoverished individuals and organizations with a credible platform to conduct damning activities with impunity, such as doing business through cybercrime.

Efforts to combat such activities must never be dumbfounded by hardened criminals. This is where governments come in. Without fostering a culture of unnecessary assault, they must develop effective ways and means to collectively regulate this vast terrain to protect global citizenship and bona fide investors. The fiat currency will be with us in the long run. It is not yet time to say goodbye to hard cash, but it is certainly high time to welcome the cryptocurrency belatedly but with a roar.

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