Advantages of investing in Bitcoin

Bitcoin, one of the most prominent and popular cryptocurrencies globally today, achieved its position in less than a decade. 

The anonymous creator, known by the pseudonym Satoshi Nakamoto, remains unidentified. Bitcoin’s creation opened a window to a new world, enabling users to exchange assets internationally without intermediaries, barriers, or compromising their anonymity.

Introduced in 2009, Bitcoin gradually gained widespread acceptance, solidifying its position as the largest and most popular cryptocurrency. 

Its unique feature lies in its use of blockchain technology, a decentralized platform immune to government intervention or control by any single entity. Additionally, it guarantees the immutability and public visibility of all transactions while preserving the anonymity of participants.

Bitcoin as a method of payment system quickly introduced itself to the public

Bitcoin’s current standing qualifies it as a successful phenomenon. However, it still has room for improvement and wider adoption.

Despite its rapid development, many individuals remain hesitant about investing and conducting transactions with it. Nevertheless, Bitcoin has the potential to replace cash in numerous transactions and even payments in the future.

If you are one of the enthusiasts of Bitcoin and believe that this cryptocurrency will have a great future, you can buy Bitcoin at OK Exchange with the lowest fees.

Benefits of Bitcoin: Scarcity and Lack of Control

Bitcoin is a peer-to-peer, open-source software-based financial system invented by an anonymous individual or group named Satoshi Nakamoto. It allows users to store and transfer value.

This decentralized network operates without a central regulatory body. Instead, it relies on blockchain-based encryption, calculated and verified by participants on the network to secure transactions and maintain the protocol. 

This protocol rewards participants who contribute computing power to verify transactions with newly mined coins or transaction fees. In simpler terms, users can “mine” coins by confirming transactions and strengthening blockchain security.

Initially, anyone with a suitable computer could mine Bitcoin. However, as a significant portion of bitcoins have been mined, and the market has become highly competitive, users now often turn to exchanges and other platforms to purchase bitcoins. Mining new coins has become specialized and resource-intensive.

Gold vs. Bitcoin: Network Effect and Demand

The concept of relying on the network effect is not unique to Bitcoin or other digital currencies. Gold also heavily relies on this effect, coupled with its established perception as a store of value.

In contrast, industrial metals like copper, solely used for functional purposes, lack this effect.

While gold has non-financial industrial applications, only around 10% of its demand stems from this sector. The remaining 90% is used for bullion and jewelry production. 

Buyers value gold for its perceived wealth preservation potential, aesthetics, durability, and other unique properties. A significant drop in the demand for gold jewelry, coins, and bullion, leading to solely industrial use, would disrupt the existing supply-demand balance, likely causing a drastic price decrease.

Therefore, the argument that “Bitcoin is not like gold because it lacks non-financial uses” is inaccurate.

While partially true for the 10% industrial use of gold, the statement fails to address the 90% demand driven by jewelry and bullion markets, heavily influenced by emotions, fashion trends, and the properties of gold itself.

A decline in public interest in gold and its storage could, in fact, expose it to similar challenges faced by Bitcoin.

However, gold takes a crucial advantage over Bitcoin: thousands of years of international history and established role as a form of currency.

This long-standing trust translates to lower risk of losing credibility, solidifying its position as a reliable store of value with less potential for dramatic price fluctuations.

The key difference lies in their age and market capitalization. Bitcoin, being newer and having a lower market cap, exhibits higher potential for both significant gains and losses compared to gold. 

As discussed in the next section, the security of digital currencies, unlike precious metals, is directly linked to their network effect.

The Security of Bitcoin

The security of a crypto asset is directly proportional to its network effect and specifically linked to its market capitalization.

A weak network is more susceptible to manipulation by entities possessing significant computing power, potentially allowing them to overpower other participants and gain control of the blockchain.

In contrast, the Bitcoin network boasts exceptional computing power, with its total annual electricity consumption surpassing that of small countries like Greece or Switzerland.

Attacking the Bitcoin network requires immense resources and computing power, and various security measures are implemented to deter potential attacks by countries or large entities.

Furthermore, it is crucial to understand that reported instances of “hacking” or “stealing” Bitcoin are not related to vulnerabilities within the Bitcoin protocol itself, which has never been successfully compromised.

These incidents typically involve theft of private keys stored on unsecured systems.

Finally, it should be noted that Bitcoin as a digital asset and cryptocurrency is now accepted by the people and many governments and can be a suitable option for investment.