Key Takeaways
- Bitcoin is a type of cryptocurrency, a digital alternative to traditional currencies like the US dollar.
- There is a lot of interest in Bitcoin, but there is also a need to clarify how it works.
- This list of ten key points about Bitcoin is designed to provide a comprehensive understanding of its basics.
I have been in crypto for over seven years, and initially, Bitcoin was not on my radar. But as I learned more about it, I realized its potential to be a game-changer.
This article explores ten fascinating aspects of Bitcoin and why, as investors, we should stay open to learning and evolving our perspectives.
Bitcoin Is A Decentralized Digital Currency
Bitcoin’s true innovation lies in creating an asset independent of traditional ownership structures. This decentralization is what makes it so powerful. Unlike traditional assets that can become worthless during war or economic collapses, Bitcoin has no central point of failure. Because it is decentralized, it can retain its value even in these extreme situations.
Bitcoin Is Scarce
Bitcoin’s total supply is capped at 21 million coins. With over 19.7 million already mined, less than 2 million are left to be released. This scarcity works similarly to gold; the fewer available, the more valuable each becomes.
Unlike the US dollar, which can be printed endlessly, causing inflation and reducing its value, Bitcoin’s limited supply helps it hold its value over time.
Bitcoin Is Divisible
While you typically see Bitcoin priced in whole coins (BTC), it can be broken down into much smaller units. The smallest unit of Bitcoin is called a satoshi (named after Bitcoin’s creator, Satoshi Nakamoto). There are 100 million satoshis in one Bitcoin, and the divisibility allows for more precise transactions, similar to using cents with dollars.
Bitcoin Transactions Are Irreversible
Another key benefit of Bitcoin is its irreversible nature. Once a transaction is confirmed on the blockchain, it is permanent. This adds significant value because it eliminates the risk of fraudulent chargebacks or reversals, something shared with traditional payment methods.
Bitcoin Can Be Stored In A Digital Wallet
A digital wallet acts like a key to your Bitcoin on the blockchain. It lets you store, send, and receive Bitcoin on your computer, phone, or online.
It is important to note that your Bitcoin never actually enters the wallet. It always stays secure on the blockchain. The wallet simply gives you access to it, allowing you to view your balance, receive payments, and make transactions.
Bitcoin Can Be Used For Online Purchases
Bitcoin has been around for more than 15 years already, and over the past decade or so, many online merchants have now been accepting Bitcoin as a form of payment.
Of course, Bitcoin’s acceptance is not as big as that of traditional currencies, which have existed for hundreds of years. But, similar to what I have been saying, there will come a point where adoption will skyrocket.
I know we are not there yet, but if you look at it from where we have been over the past decade, it has grown by leaps and bounds, especially for people in developing countries where their currency continues to get devalued, making it so hard for them to be able to swap to other foreign currencies as well.
Bitcoin Is Highly Volatile
Sure, Bitcoin’s volatility can be concerning, especially for newcomers. After all, anything new and complex is bound to face some skepticism. The price fluctuations can be scary for some, but it is important to remember that volatility is separate from the underlying technology.
Bitcoin has existed for over 15 years as a technological innovation. While its price may go up and down in the short term, the core technology behind Bitcoin is constantly evolving and improving!
Bitcoin Is Not Backed By Any Physical Asset
Unlike traditional currencies like the US dollar, Bitcoin is not propped up by physical assets. The US dollar’s value is tied to the government’s promise, which relies on a strong economy.
On the other hand, Bitcoin draws its value from three primary sources: scarcity, usefulness, and the trust it has built as the first and biggest cryptocurrency. This trust is further amplified by the network effect, which strengthens as more people use Bitcoin.
Bitcoin Is Proof-Of-Work
Bitcoin is created through proof-of-work mining, which involves powerful computers tackling complex mathematical problems to facilitate transactions and make the network more secure.
While the global network of computers keeps things decentralized, the miners actually act as the guardians of security. Therefore, proof-of-work mining creates a decentralized and secure system for the network.
Bitcoin Is Still Relatively New
Lastly, it is important to keep in mind that Bitcoin is a relatively recent technological innovation, and its adoption continues to evolve each year. Consequently, the information and public perception surrounding it will also evolve over time.
Final Thoughts
After reading this article, I hope this piques your curiosity and encourages you to delve deeper into Bitcoin and blockchain technology. However, do not just blindly accept my explanation at face value; please conduct more extensive research so that you can form your own conclusions as well.
