Jenny Gupta » Bitcoin and cryptocurrencies

A cryptocurrency is a digital asset designed as a medium of exchange. It uses cryptography to secure transactions and control the creation of additional currency units. Cryptocurrencies are digital currencies, a subset of alternative currencies. The most popular cryptocurrency is Bitcoin, and since its invention, the various new cryptocurrencies that have been created are often referred to as altcoins, short for Bitcoin alternative.

Bitcoin was designed to be a peer-to-peer system for online payments without the need for a trusted central authority. Since its invention in 2008, Bitcoin has evolved into a currency, a technology, an investment vehicle and a user community. In fact, it is believed to be the first cryptocurrency, although as mentioned, similar systems have existed before. Because the Bitcoin system operates without a single administrator (like PayPal) or central repository, the US Treasury Department has categorized Bitcoin as a decentralized virtual currency. In fact, the first decentralized digital currency would be a more correct term than the first cryptocurrency.

Since all transactions are digital and take place directly between users and without intermediaries, it is important to ensure that users do not spend more Bitcoins than they own. Therefore, all transactions are verified by network nodes and recorded in a publicly distributed ledger called a blockchain.

While everyone has heard of Bitcoin and other cryptocurrencies, few have complete knowledge of how they work. In the remainder of this article, we will introduce you to the main advantages and disadvantages that you should consider before taking advantage of the possibilities of Bitcoin.

Advantages and disadvantages of using bitcoin
Due to bitcoin's relatively novel nature, its price can increase or decrease unpredictably over a short period of time, and it can sometimes be more illiquid than other types of currency. This means that keeping your savings in bitcoins is a risky decision and not recommended. Bitcoin is seen as a high-risk asset, and it is not advisable to store money in bitcoins that you cannot afford to lose. On the other hand, due to its high volatility, those willing to take a risk may see considerable returns over a short period of time. Lack of awareness and understanding of bitcoin means it is relatively rarely used among businesses as a billing method. Once more and more businesses and private individuals start using bitcoin, its volatility and its liquidity risk should settle down.

Another thing to consider before acquiring bitcoins is the security of your digital wallet. Like your real wallet, your bitcoin wallet needs to be safe. Indeed, since bitcoin makes it possible to quickly and easily transfer funds anywhere in the world, the security concerns it poses are even greater. Remember, it is your responsibility to adopt good security practices. Overall, bitcoin is considered to be a safe and transparent system due to its cryptographic security. As a bonus, bitcoin users can enjoy considerably smaller transaction fees than those charged by credit cards or PayPal.