Bitcoin a Safe Investment?

Is Bitcoin a Safe Investment?

Bitcoin a Safe Investment?

Bitcoin is an electronic currency that is marketed to be safe and secure. Is that really true?

Bitcoin is developed over the blockchain concept which is to have a decentralized network and to have a ledger of all the transactions ever made on the network. This is what makes the network safe and secure.  Since Bitcoin does not exist physically but electronically and there is no one to adjudicate the transaction and its value it can be manipulated, unlike real currency. This is one of the main arguments against bitcoins but this is NOT TRUE.

The ledger that we mentioned previously is the reason why. The ledger contains a record of all valid transactions ever taken place on the network. Once a transaction request is received, special nodes or points on the network called miners check the validity of the request. The bitcoin protocol checks the transaction to see if the sender has the amount he is sending, it also checks if both the addresses are valid and also checks a few other things to make sure nothing underhanded is happening. This also eliminates what is called the double-spending problem. For example, you have $100. You give $100 to friend A. But you duplicate your money before you give it. Now you give this $100 to friend B. You initially had $100 but you gave away $200. This is the double spending problem. The blockchain is used to nullify this problem as all valid transactions are recorded there. Therefore duplicating bitcoins is next to impossible in this system.

Now we know bitcoin is safe and secure. The next question is whether bitcoin is a safe investment. We are not financial experts so you should do your research on the safety of investments. It is your money in the end that you could, potentially, lose. But in our research bitcoin investment is generally safe if you are careful and a little bit lucky. Since Bitcoin does not have an infinite supply (capped at 21 million BTC) like other currencies it should be more valuable, right? Well, technically its price is determined by buyers and sellers buying and selling bitcoin on a specific market not wholly on its rarity and utility. Therefore different markets have different prices. Also, there was the huge spike in price in the last year because more and more people got to know about bitcoin and its price went up because they all wanted to own bitcoin. Now if they decide they don’t want bitcoin anymore, its price will plummet. This is starting to look a whole lot like stock exchange in the sense of its volatility if nothing else. So again it’s safe as long as you know what you are doing. Also, it is always important to remember to never invest more than you can afford to lose. This way you are still financially secure even if things don’t go your way.