Learn about the different myths and truths about investing in Bitcoin and Cryptocurrencies so that you can make an informed decision.
Currently, there are many cryptocurrencies, and they are becoming more popular. However, there are some myths about investing in Bitcoin and other currencies of this type worth clarifying if you consider investing your money.
Myths and truths about investing in Bitcoin and Cryptocurrencies
- Cryptocurrencies have no value
Detractors of digital currencies often say that they have no intrinsic value and are not backed by another currency or precious metal. But the truth is that they are exchanged daily and used as a conventional currency, so they have a real value determined by the market. The important thing is that you can inform yourself and evaluate what to invest in before deciding.
- Cryptocurrencies are illegal and are used to launder money
They are a currency that, although not regulated in many countries, is legal. They are estimated to be unlikely to be used to launder large amounts of money, as cash remains a favourite with criminals.
In addition, platforms to invest in cryptocurrencies are regulated in many countries and operate under regulations to avoid this crime.
- Cryptocurrencies can be easily counterfeited
Cryptocurrencies operate with their codes, and due to the nature of blockchain technology, it is almost impossible to duplicate transactions or produce fake cryptocurrencies. From this point of view, it is safe to invest in bitcoin.
- Bitcoin is a Ponzi or pyramid scheme
Cryptocurrencies are a technology that serves as a store of superior value or as a secure and uncensored transfer protocol. In Satoshi Nakamoto’s original Bitcoin proposal, there is never any talk of any ROI when trading digital currency. They are only virtual currencies, not business models.
- Investing in Bitcoin and other cryptocurrencies is bad business
According to the BBC, in January 2009, Bitcoin was worth less than a dollar; in 2017, it was close to the US $ 20,000; the following year, it fell to the US $ 3,200; in 2019, it rose to the US $ 13,800, and in January 2020 it was around $ 9,000. Bitcoin has high volatility due to different factors, but it has shown very high profitability since its creation. In that sense, they can become a business if you feel comfortable taking risks; the key is that you do the proper market analysis and carefully study the behaviour of the cryptocurrency.
- Platforms to invest in cryptocurrencies steal from their users
You have to operate on platforms of recognized reputation, which offer you guarantees and good support. That way, it is safe to invest in Bitcoin and other cryptocurrencies.
Cryptocurrencies may one day replace cash and credit cards, but for now, all existing digital currencies are considered to be only worth a small percentage of the world’s physical money. You can aim to invest in Bitcoin as a form of diversification or generate capital gains both in the long and short term.
Remember to research your options very well and consider various investment strategies, either for uncertainty or economic stability.
What is Bitcoin? History, characteristics, pros and cons
What is Bitcoin: A guide to the first cryptocurrency
Definition of Bitcoin
Bitcoin (BTC) is the first digital currency used and distributed electronically.
Bitcoin is a decentralized peer-to-peer (peer-to-peer) network. No institution or person controls its issuance, spending or reservation.
The production of each Bitcoin is maintained digitally, and it is prepared under a controlled issuance policy in which there are only 21 million units.
Who Created Bitcoin?
Bitcoin was first presented as open-source software by an anonymous programmer, or a group of programmers, under the alias of Satoshi Nakamoto in 2009. The economic crisis that the financial sector was going through by the real estate bubble and the respective decision that The governments took to print inorganic money to rescue the banks was one of the main motivations of Satoshi to create the currency, and we can see this in the image that he left engraved in the Bitcoin Genesis Block.
There are still many rumours about the true identity of the creator of BTC. However, all the people mentioned in those rumours have publicly denied being Nakamoto.
Nakamoto himself once said that he was a 37-year-old man living in Japan. However, due to his perfect English, the hours he participated in the forums and his software not tagged in Japanese, there are reasonable doubts about this. Around mid-2010, Nakamoto moved on to other things, leaving Bitcoin in the hands of some prominent members of the BTC community. Satoshi was also named Gavin Andresen’s lead developer.
It is presumed that the figure of Satoshi Nakamoto owns around 1 million Bitcoins, which represents about 5% of the global emission that exists of the asset.
Who controls Bitcoin?
According to Gavin Andresen, after Nakamoto left the project, the first thing he focused on was further decentralization. Andersen wanted Bitcoin to continue its existence autonomously, even if he was ‘hit by a bus.’
For many people, the main advantage of Bitcoin is its independence from governments, banks and global corporations. No authority can interfere with BTC transactions, impose transaction fees, or take money from people. Furthermore, the movement of Bitcoin is extremely transparent – each transaction is stored in a massive distributed public ledger called the Blockchain.
The Proof-to-Work algorithm was proposed to achieve consensus among users, translated into Spanish as Proof of Work. This algorithm implies that users connected to the platform must contribute their computing power to encrypt and decrypt transactions within the network. The users that generate the most computing power elaborate the longest Blockchain, and the system will understand that this chain will be the legitimate one, considering that it is the one with the most user participation.
How does Bitcoin work?
By way of visualization, users only see the amount in Bitcoin they have in their wallet and the results of the different transactions they have made with the currency.
However, behind the scenes, a public ledger called a “blockchain” is being shared on the Bitcoin network operating 24 hours a day, 7 days a week. This book contains every transaction processed between users on the network. The digital records of transactions are combined into “blocks.”
If someone tries to change only one letter or number in a transaction block, it will also affect all subsequent blocks. Because it is a public book, anyone can easily detect and correct the error or attempted fraud. In addition, to make such a change in the Bitcoin network, it would be necessary to have more computing power than all the power connections within the network. Neither Google nor Facebook has such computing power in the world.
Each user’s wallet can verify the validity of each transaction. To provide authenticity for transactions, they are protected by digital signatures corresponding to the shipping addresses.
Due to the verification process and depending on the trading platform, a BTC transaction may take a few minutes to complete. The Bitcoin protocol is designed so that each block of transactions takes about 10 minutes to mine.
However, thanks to the development of Lightning Network technology, transactions with Bitcoins can be carried out in much less time. This tool allows us to create Payment Channels outside the Bitcoin Blockchain network to execute faster transactions without going through the cumbersome verification process.