There is a lot of interest surrounding Bitcoin and just how it can make money for the common man. The first of various cryptocurrencies, Bitcoin came on the scene in 2009. It is actually an electronic form of currency which is quite unlike regular cash as we know it. Bitcoin functions independently of regular currency, and as such, has a low risk of inflation. The additional security afforded by the advanced encryption it uses, makes it quite appealing to many people. At the same time, however, many people are a little standoffish when it comes to cryptocurrency because they don’t completely understand all of the nuances behind the cryptography used to secure the transactions. Nevertheless, they are fast catching on as cryptocurrencies like Bitcoin are being dubbed as the currency of the future, and the advantages cryptocurrencies have over traditional currencies or investments are becoming more apparent. Let us take a look at how cryptocurrency matches up against the traditional currency.
Cryptocurrency versus Traditional Currency
- Using the Bitcoin as an example, cryptocurrency does not require the involvement of a third party in trading as with regular currency. This still applies even if the transactions are being carried out internationally. The elimination of the need for a third party gets rids of the need to pay additional fees which generally pop up with the inclusion of a third party. Any associated processing fees are quite minimal especially in comparison with what traditional financial institutions generally charge.
- The circulation of Bitcoins is controlled in three ways. One of the main ways is through mining which is a process of verification and subsequent release. Another way is through using them as payment for products or services. And thirdly, by purchasing them on a cryptocurrency exchange. The fact that they can only be circulated and distributed in these specific ways, gives it much stronger security than that afforded by regular currency.
- When using traditional currencies or even checks, many times the transactions take a considerable period of time before they are cleared. In addition, traditional financial institutions have their various fees to process these lengthy transactions. Cryptocurrencies like Bitcoin completely solve this issue. They make the speed of transactions instantaneous anywhere in the world they take place. In addition, they afford great cost savings to its users with low or non-existent fees in some cases.
- With growing interest in the Bitcoin, some major online merchants including Amazon, have begun accepting it as a legitimate way to pay for items purchased. As a result, it is becoming increasingly available to transact business in the online and global sphere. Many purchases are restricted to certain currencies only, and this is a challenge facing many people who try to do transactions with traditional currency. With Bitcoin, this restriction is removed and the global marketplace becomes truly open.
- As a final advantage,the use of Bitcoins allows complete privacy in terms of preservation of identity, and thus identity fraud is prevented quite simply.
How Bitcoin Matches Up Against Traditional Investments
When it comes to investments, Bitcoin investments tend to be highly liquid. This means that you can trade at a stable price, which is not usually the case with most traditional investment options. It is a truly global currency which makes trading and investing easy and secure across international borders.
Unlike with the traditional currency where the value is dependent on government regulations and other global factors which cause the value to go up and down, the value of Bitcoin is solely determined by the demand of the users for them. As a result, the demand which is at this time increasing and is expected to continue that way for a while will result in great Bitcoin investment returns. To put that into perspective, someone who invests $1000 at the beginning of the year in a traditional investment vehicle at a rate of 10% profit for the year will only earn $100 on their investment by year’s end. With Bitcoins, on the other hand, someone who invests the same amount will surpass that in ways they will not be able to foresee, simply based on the demand. The ceiling really cannot be specifically determined based on the current upward trend of Bitcoin investment.
When compared to the traditional methods of investing in stocks which require specialized knowledge and familiarity with the stock market, with Bitcoin investment, the complexity vanishes. Trading can simply be done by means of Bitcoin exchanges, and automated exchanges can also be set up. The process is really not as complex as many people might think.
The fact that Bitcoin has been around for 8 years without any major intrinsic issues, really gives it a stable record which speaks for itself. Why not consider using Bitcoins as an investment instrument in lieu of traditional vehicles, especially at this time when the Bitcoin investment returns are so robust?