7 Facts You Need to Know Before You Embrace Bitcoin
Bitcoin has been around since early 2009. Its popularity has increased, and many other similar assets have been launched. You have likely heard of this new class of assets, and you are considering embracing it.
Before you take that step of installing a wallet on your phone and buying bits of Bitcoin, you must be aware of the following facts:
1. The Assets Are Built on Decentralized Technology
Most services online, including payment solutions, are offered through platforms built and controlled from a central point. In other words, it is often a company with shareholders, management, and staff behind the service.
That is not the case with Bitcoin and other similar digital currencies.
The platforms on which cryptocurrencies function are decentralized networks of computers that collaborate through automated consensus mechanisms. That means that there is no means for one individual or entity to censor or manage how they are used.
It also means as the end user, you are completely in control of your assets, and there is no customer support to reach out to in the event you lose that control.
2. They Are Bearer Assets
What this means is that the assets are mostly delinked from the owner. Whoever controls the private keys of the digital wallet is considered the bonafide owner as they have the power to spend the funds in it. There is never the need to verify the real-world identity of the owner.
That calls for increased vigilance over the private keys, especially given that once you lose them, you cannot call a customer support center to recover them.
3. They Are Not Completely Private
In the early days of Bitcoin, there was a widespread misconception that the digital currency was completely private. Indeed, there were concerns that criminals would use it to avoid detection by law enforcement agencies. It has now become apparent that this is not the case. Indeed, criminals are much better off using physical cash than Bitcoin or other similar currencies.
That is because bitcoin transactions are recorded on a public ledger that is accessible to everyone, including law enforcement agencies. Indeed, while the assets on the ledger are delinked from those who own them, it is now possible for law enforcement to go through the ledger using special tools and uncover critical details about transactions.
4. You Can Use Them in Most Stores
Contrary to what many believe, you can use Bitcoin and other similar currencies to shop in most online and offline stores. That is even though most stores are not accepting crypto for reasons ranging from lack of technical know-how to the lack of regulatory clarity.
However, using special solutions, you can pay using crypto, but the merchant receives it in the currency of their preference. The most used solution of this kind is a crypto debit card. This card is supported by mainstream payment rails such as Mastercard and visa.
The card is linked to a crypto wallet and an exchange. The funds are converted from crypto into fiat through the exchange whenever you want to make payments or withdraw from an ATM. The cards function as on-ramps and off-ramps.
5. They Are Generally Deflationary
Inflation eats into the money that people hold for especially a long time. That is mostly because, over time, more currency is released into circulation, diluting the purchasing power.
Bitcoin and other cryptocurrencies have the number of units that will ever be released capped. For example, there will never be more than 21 million. That means with increased adoption, there is likely to be an increased value of the currency over time.
This cap can not be removed as anyone with the power and authority can remove it.
6. How to Secure Your Funds
Before you start using crypto, understand how it works. In particular, familiarize yourself with the different types of wallets and how to have them so that your private keys cannot be stolen.
7. Never Trust Anyone to Hold Your Private Keys
Private keys to your wallet are like the password to your email. You should never have someone keep them for you. The rule of thumb is to keep your assets in a wallet you have full control over.
It is important that you take time to understand how crypto works before investing your resources in it.