Does Bitcoin Have a Financial and Investment Future?

For people interested in investing, there’s a new commodity in the market. Well, it’s not that new, but it has caused a lot of buzz in the financial market recently. The new flavor favored by investors is the bitcoin.

Literally invented just a few years ago as a currency for the digital age, bitcoin just lingered until recently when it has become a popular commodity.

Its popularity has spiked because mainstream financial and investment firms are showing support. The buzz is that in the next two years the market for bitcoin will be bullish and it’s expected to continue that way for the next decade and the decade after that. All of the buzz is due to positive media content.

Bitcoin as a digital currency is part of a new currency classification known as Cryptocurrency. Since the so-called invention of bitcoin, other new currencies have been created that are specifically for performing commerce on the Internet. Thus, they are referred to as digital currency or Cryptocurrency.

And recently, mainstream financial and investment companies have been promoting it heavily. How heavily? Check out YouTube on the subject.

Companies including Pasco are supplying Cryptocurrency including bitcoin to mainstream companies. For example, Pasco provides PayPal with it and the CEO of the company says that “billions” of people will get involved with it.

In a summit of investors to be held January 20 -24, 2021, 47 top currency experts are expected to endorse bitcoin as a viable investment commodity.

And the hype continues. Ruffer Investment Management located in the UK recently acquired more than $745 million in bitcoin. It’s just one of a number of mainstream companies including Mass Mutual and Guggenheim that are doing the same. It is said that these investments are the driving force of a bitcoin price rally.

Morgan Stanley has a digital asset division that is actively promoting digital refinance. An executive of the company claimed recently that bitcoin could replace the U.S. dollar.

The popularity jump in bitcoin isn’t restricted to the financial sector. While one could understand that the bitcoin market would be big in the United States making it number one investment of all global nations, Nigeria is number two. No kidding. Nigeria is the second largest bitcoin market in the entire world.

Why bitcoin has become so important in Nigeria is an interesting story. During police brutality protects in Nigeria in October 2020, the government closed down the activists’ access to Internet donation platforms, which the protesters relied on for financing its activities. Bitcom stepped up and supplied the movement with about $400,000, about 40% of their assets.

Nigeria’s connection to bitcoin goes back to 2015. During the last five years that country has traded 60,215 bitcoin, valued at more than $566 million, the second largest volume traded worldwide.

Bitcoin is already dropping like rain into personal financial activity. Believe it or not, The Salvation Army accepts them as a charitable donation in the United States. Moreover, crypto-exchange services are offering the same services that banks commonly offer.

So what is bitcoin.

The name ties bitcoin to the digital world –- bit and coin. In computer parlance, the digital domain is binary –- 0s and 1s. In computer speak the digits are referred to as bits. The imaginary commodity serves as a coin that is used to make transactions in the digital realm. The coins are stored in computers and are referred to as cryptocurrency or digital currency.

Bitcoin was invented in 2009 as a way to remove banks from transactions. Before bitcoin, if you wanted to transfer say $2500 from the United States to a friend or a business in France, the money traditionally passes through a bank in the two countries. Each bank charges a fee for processing the transaction. Moreover, each bank stores data on you and the person to which you have transferred the funds.

The personal data isn’t totally secure. Banks have been hacked over the last 10 years and important personal data has been lost to bad guys. Perhaps as a form of security, banks can freeze or block an individual’s account whenever they want. Thus, they have control over the people who use banks. At times, they have fiddled around with people’s accounts. For example, banks were involved in the financial crisis of 2008.

Unlike a bank, the structure or network that supports bitcoin has no single authority like a bank.

How Bitcoin Work.
The bitcoin infrastructure relies on three elements –- Cryptography, Supply and Demand, and Decentralized Networks.

Cryptography has its roots in World War II. Basically, it was code that could not be read unless someone cracked it. The ability to crack the code was based on mathematical formulas.

Bitcoin uses cryptography to convert transaction data into code so that only the right people are able to read it. This is why bitcoin and other so-called currencies used in the digital realm are called cryptocurrency. The coding of the transaction occurs due to blockchain technology.

Supply and demand is the economic principle that the less there is of something that is greatly demanded, the more expensive it is. And conversely, the more there is of something that is demanded, the cheaper it is.

This concept when applied to bitcoin is that the supply of bitcoin is limited and it is produced at a fixed rate. That rate decreases over time. The amount of bitcoin in the market is currently limited to 21 million. Once this number is achieved, no more coins will be created. Currently, there are 18.5 million bitcoin in existence.

A decentralized network when used in the bitcoin infrastructure is that data associated with bitcoin transactions is everywhere. It is not concentrated in one place.

So how do these three elements — Cryptography, Supply and Demand, and Decentralized Networks work together to perform a bitcoin transaction?

To start off, all data associated with a transaction is put into a database that is shared. The shared data is referred to as a distributed ledger. It can be accessed through the blockchain.

If you wanted to send bitcoin to a friend, business, or associate, you must digitally sign a memo that states that you intend to sent a certain number of bitcoin to whomever. The message is broadcasted to every computer in the network where the distributed ledger is located and your message is stored there.

When you first get involved in a bitcoin transaction, a bitcoin wallet in which your bitcoin are stored is created for you. You get two keys that gain access to your wallet, a public key and a private key. These are a set of numbers and letters and serve as your username and password.

People who transact in bitcoin need your public key to send bitcoin to you. No one is aware of your name, email address, or anything else concerning your personal identity. So, as far as the bitcoin network is concerned, you’re anonymous.

Your private key remains on the blockchain. It is your identity. No one sees it and you are advised not to give it to anyone. You use your private key to access your bitcoin from your wallet. You don’t want anyone to gain access to your private key. If they do, they can steal bitcoin from your wallet and transfer it to their wallet. However, your real identity is secure because it is not needed to receive or send bitcoin. A bitcoin cannot be spent twice.

Advantages of Bitcoin.
The benefits of using bitcoin is that:

• International payments occur much faster than bank payments.
• Fees are low
• Blockchain is nearly impossible to hack.
• Due to decentralization of the network, transactions cannot be shut down from a single point.
• It’s fully transparent because you don’t have to trust anyone.
• It’s anonymous because you don’t use your name.
• Since the bitcoin community powers the network, fees are shared and do not go to a single source.
• Since there is no need for new users to show verification, anyone can use it.

Disadvantages of Bitcoin.

• Bitcoin requires the use of lots of electricity, angering environmentalists.
• The transaction in bitcoin is not as fast as it is with other cryptocurrencies.
• Fees change frequently
• Since using them is anonymous, it is vulnerable to use by criminals or other bad guys.
• It is difficult to use due to the keys and other issues.
• No monetary sovereignty, that is bitcoin is not backed by any governing entity. It is accepted only in the perceived value of other bitcoin users.

How to acquire bitcoin.
There are three ways to acquire bitcoin:

• Broker exchanges
• Peer-to-Peer exchanges
• Bitcoin ATMs

Purchasing bitcoin through broker exchanges require that you use your name, address, and some form of identification including a passport or driver’s license. Brokers charge a fee from 1% to 5%.

You can purchase the coins using bank transfers, debt or credit cards, and PayPal.

Using a broker exchange to buy bitcoin is analogous to exchanging local currency into foreign currency.

Peer-to-peer exchanges don’t use a middleman in the transaction process. It allows you to send bitcoin to someone else without anyone else being involved. Since there is no broker, there are no fees.

Although there are not many available, bitcoin can also be acquired via ATM. If you use this option, you buy the coins with cash, but transaction fees are expensive, about 5% to 10%.

Methods to earning bitcoin.
Thus, there are a number of ways one can earn bitcoin. They include:

• Selling merchandise that is paid for with bitcoin.
• Mining bitcoin.
• Investing in bitcoin.

Selling merchandise paid for with bitcoin.
This way of earning bitcoin could be the easiest. Simply come up with a product that is related to bitcoin and then sell it on online marketplaces or on your own website.

Mining bitcoin.
Mining bitcoin is the process of adding new blocks to the blockchain. The process involves creating a new block of bitcoin from the computers or nodes in the network. In mining, the nodes or computers in the network must process bitcoin transactions and verify them as real. To do this, the miner must solve a mathematical problem. Solving the problem verifies the block of transactions and a new block is created. A new mathematical problem is created for each new block created that other miners can find.

Investing in Bitcoin.
One company that is a large player in bitcoin investing is Grayscale, an investment firm that is involved with bitcoin investments through its Grayscale Bitcoin Trust. Started in September 2013, it permits businesses and investors to trade shares in trusts in exchanges including the stock market. The company also offers other exchange-traded Cryptocurrency products including Ethereum and Litecoin.

At the end of 2020, the Grayscale Bitcoin Trust controls $11.5 billion of privately invested Bitcoin assets. The company holds 70% of the 775,137 Bitcoin currently held by publicly traded companies, according to Bitcointreasuries.org.

Grayscale invites private investors to assure money to the fund and then uses it to buy bitcoin. Grayscale then lists the fund on public stock exchanges.

Grayscale offers a number of bitcoin trusts that provides various tax benefits. It offers a variety of IRA accounts including Roth IRA as well as other investor accounts that off tax benefits on bitcoin investments.

Currently, you can’t trade bitcoin stocks against other company stocks without using crypto stock-derivatives platforms. That blocks investors from the crypto economy. Grayscale has provided an option for traditional investors to become players in the crypto economy.

Another major player in bitcoin is MicroStrategy, a business analytics firm. To say the least, it is bullish over the investment. Between August and December 2020, the company has purchased $1.124 billion in bitcoin.

According to Michael Saylor, Chairman and CEO of MicroStrategy, bitcoin is a “dependable store of value and an attractive investment asset.”

MicroStrategy’s bullish attitude toward bitcoin is expected to encourage other large businesses to buy in.

As in any type of investing it is cautioned that you do your due diligence in understanding the commodity in which you are investing. As is the case in any form of investment, bitcoin investment can be a risk.

Originally published at https://greysonglobal.com