Bitcoin is still relatively new, having only been around for around 9 years. It is the original cryptocurrency that is not regulated by any central authority or bank. The concept of the Bitcoin investment vehicle is really new. Only recently has it become possible to use bitcoin as a form of currency to purchase goods and services, and it is now already possible to add them to a self-directed IRA as an investment. the big question is whether or not investing in Bitcoin is a good idea. There is no clear-cut answer to this as nobody knows exactly how the world will change. Hence, all you can do is educate yourself on what cryptocurrencies are and how they differ from the traditional currencies and then make your own judgment.
How the Bitcoin Investment Vehicle Is Different from Traditional Currencies
There are a number of big differences between cryptocurrencies and fiat currencies:
- Bitcoin is completely decentralized. This means no government, credit network, or bank oversees it. It is managed fully by Minors and users who can be found around the world. It is an anonymous currency and all transfers are made online without a clearinghouse as an intermediary. This also ensures transaction fees are very low.
- In order for someone to acquire a bitcoin, they have to mine for it. Mining refers to resolving of complex mathematical equations and algorithms. It is also possible to purchase bitcoin from miners.
- Only 21 million Bitcoin will ever be in existence. In 2013, 12.1 million Bitcoin comma so just over half, have been mind. It is estimated that the final bitcoin will be mined in the year 2040. Because of this limited availability of Bitcoin, which will never change, the currency becomes more valuable with every coin that is mined.
- The blockchain is the public lecture on which all transactions in Bitcoin are registered and where the holdings of the different bitcoin owners are listed. This letter is public and allows anybody to verify transactions. This makes it a highly predictable and transparent currency. This also means that double spending is impossible fraud. Yes, bitcoin is anonymous, which means the ledger does not mention names.
- Because mining for bitcoin is becoming increasingly difficult, with even supercomputers struggling to resolve the algorithms, most people now acquire bitcoins through exchanges, where they essentially trade them for fiat currency.
- With the popularity of cryptocurrencies increasing, there are now a number of online merchants and mom and pop stores where you can pay for your purchases using this currency.
- In order to store a bitcoin, you need a bitcoin wallet which is not unlike a PayPal account. This allows for the anonymous transfer of Bitcoin between users, based fully on private Keys. This Is what continues to guarantee the anonymity.
- There is no insurance or protection for a bit green. Hence, if your private key is lost or stolen or if a Bitcoin exchange closes, there is no way for you to recover your Bitcoin.