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The Emergence of Bitcoin

Updated on April 17, 2018
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What is Bitcoin?

Bitcoin is the digital equivalent of cash, and like giving someone cash; the money does not have to go through any intermediary such as a bank or financial institution.

Bitcoins Rise to Popularity

Bitcoin, a relatively new form of currency, has been growing in popularity ever since its emergence in 2009. After the recession of 2008, said to be the worst financial crisis since the Great Depression, it was developed and introduced to the public by someone under the alias of Satoshi Nakamoto.

How Bitcoin Works

In addition to being a form of currency, Bitcoin is also a record of every transaction made with the currency, as well as every Bitcoin wallet or account balance. With every wallet, there is both a public and private key, and they are both alphanumeric codes. The public key if used so that people may be able to send you some of the currency. To ensure that your account is not compromised, you must keep the private key protected at all costs. If you hold the private key, you can send the Bitcoins in the corresponding wallet as you may, so it would be very dangerous for someone to obtain your private key.

Where Can Bitcoin Be Purchased?

Buying Bitcoin is similar to the purchasing of stocks, because it can be bought on an exchange such as

• Coinbase

• Bitstamp

• Bitfinex

Why Bitcoin is Purchased

Bitcoin is typically bought for a variety of different reasons, like purchasing merchandise anonymously, making international payments, or for investment purposes. Bitcoin purchases are anonymous in the idea that only wallet IDs are shown on the transaction log, not information such as the names of buyers or sellers. It is easier to make international payments with a currency like Bitcoin because it is a universal currency that is not tied to any country, or subject to most regulations. Bitcoin is also purchased by investors, in the hopes that they eventually increase in value and therefore give them a high return.

Advantages of Purchasing Bitcoin

Some pros of using Bitcoin are its current worth, its high liquidity, and because it can be considered a hedge against market uncertainty. Currently, 1 Bitcoin is valued at approximately $8,000 – around a $6,000 increase from this time last year. From the significant change in worth, one could assume that it is probable the currency would increase from here on out, providing investors with a high return. Bitcoin is highly liquid as well, meaning it converts to cash quite easily. Unless you have tens of thousands of dollars invested in the currency, you would be able to cash out without much difficulty. Bitcoin can also be used as a hedge against market uncertainty, because investors may see the currency as a way to protect themselves from any market failure.

Advantages and Disadvantages of Purchasing Bitcoin - At A Glance

Advantages
Disadvantages
High Current Worth (Around $8,000)
Volatility in Price and Worth
High Liquidity
High Risk of Loss
Hedge Against Market Uncertainty
Financing of Illegal or Immoral Activities

Diadvantages of Purchasing Bitcoin

Some disadvantages of purchasing Bitcoin are the volatility in price and worth, a high risk of loss, as well as the possibility that it may be used to finance illegal or immoral activities. Although Bitcoin is currently worth almost $8,000 and produces high returns, the volatility in price is a major concern. In the process of writing this article, the worth of 1 Bitcoin changed quite dramatically. The volatility in price also produces a high risk of loss, since one day you could buy the Bitcoin at a high value, and the next it could drop dramatically making you question your investment. Lastly, due to the anonymity of Bitcoin, it could be used to finance illegal or immoral activities such as pornography, drugs, etc.

Should You Invest in Bitcoin?

As you can tell from above, Bitcoin is considered a risky investment. I hope to have provided you with some information on whether or not the risk is worth taking!

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    • carrie Lee Night profile image

      Carrie Lee Night 

      5 months ago from Northeast United States

      Thank you for sharing :) I have heard about Bitcoin on the news but had no clue what it was until now. You made this hub very easy to understand and I feel informed .

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