Bitcoin has been in the news for the last couple of weeks, but a lot of people are still unaware of them. Could Bitcoin be the future of online currency? This is just one of the questions, frequently asked about Bitcoin.
How Does Bitcoin Work?
Bitcoin is a type of electronic currency (CryptoCurrency) that is autonomous from traditional banking and came into circulation in 2009. According to some of the top online traders, Bitcoin is considered as the best known digital currency that relies on computer networks to solve complex mathematical problems, in order to verify and record the details of each transaction made.
The Bitcoin exchange rate does not depend on the central bank and there is no single authority that governs the supply of CryptoCurrency. However, the Bitcoin price depends on the level of confidence its users have, as the more major companies accept Bitcoin as a method of payment, the more successful Bitcoin will become.
Benefits and Risks of Bitcoin
One of the benefits of Bitcoin is its low inflation risk. Traditional currencies suffer from inflation and they tend to lose their purchasing power each year, as governments continue to use quantitative easing to stimulate the economy.
Bitcoin doesn't suffer from low inflation, because Bitcoin mining is limited to just 21 million units. That means the release of new Bitcoins is slowing down and the full amount will be mined out within the next couple of decades. Experts have predicted that the last Bitcoin will be mined by 2050.
Bitcoin has a low risk of collapse, unlike traditional currencies that rely on governments. When currencies collapse, it leads to hyperinflation or the wipeout of one's savings in an instant.
The Bitcoin exchange rate is not regulated by any government and is a digital currency available worldwide.
Bitcoin is easy to carry. A billion dollars in the Bitcoin can be stored on a memory stick and placed in one's pocket. It is easy to transport Bitcoins compared to paper money.
One disadvantage of Bitcoin is its untraceable nature, as Governments and other organizations cannot trace the source of your funds and as such can attract some unscrupulous individuals.
How to Make Money with Bitcoin
Unlike other currencies, there are three ways to make money with Bitcoin, saving, trading, and mining. Bitcoin can be traded on open markets, which means you can buy Bitcoin low and sell them high.
Volatility of Bitcoin
The value of Bitcoin dropped in recent weeks because of the abrupt stoppage of trading in Mt. Gox, which is the largest Bitcoin exchange in the world. According to unverified sources, trading was stopped due to malleability-related theft that was said to be worth more than 744,000. The incident has affected the confidence of the investors in the virtual currency.
According to the Bitcoin chart, the Bitcoin exchange rate went up to more than $1,100 last December. That was when more people became aware of the digital currency, then the incident with Mt. Gox happened and it dropped to around $530.
In 2014, We expect exponential growth in the popularity of bitcoin around the world with both merchants and consumers, Stephen Pair, BitPay's co-founder, and CTO, and anticipate seeing the biggest growth in China, India, Russia, and South America.
India has already been cited as the next likely popular market that Bitcoin could move into. Africa could also benefit hugely from using BTC as a currency-of-exchange to get around not having a functioning central bank system or any other country that relies heavily on mobile payments. Bitcoin's expansion in 2014 will be led by Bitcoin ATMs, mobile apps and tools.
World Experiences Bitcoin
More people have accepted the use of Bitcoin and supporters hope that one day, the digital currency will be used by consumers for their online shopping and other electronic deals. Major companies have already accepted payments using virtual currency. Some of the large firms include Fiverr, TigerDirect, and Zynga, among others.
The Future of Bitcoin
Bitcoin works, but critics have said that the digital currency is not ready to be used by the mainstream because of its volatility. They also point to the hacking of the Bitcoin exchange in the past that has resulted in the loss of several millions of dollars.
Supporters of digital currencies have said that there are newer exchanges that are supervised by financial experts and venture capitalists. Experts added that there is still hope for the virtual currency system and the predicted growth is huge.