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Technology is a wonderful thing. It helped to digitalize the world. Computers switched all those abundant and numerous tasks that had to be repeated on a daily basis. One by one, our daily tasks get replaced by something spewing from the technology bubble.
Instead of calling people, we can text them. Instead of vacuuming our rooms, we can have a small robot do it for us. Even our toothbrushes have motors now. When banks went online, people started to wonder if we’re going to have a digital currency. Click on to read more.
Now, that was around the same time when Bitcoin was introduced. Then, people started to wonder what it was, and how will cryptocurrencies replace real money? Will paper money lose its value as soon as everything goes digital? Well, no one knows the answers to those questions for sure, but most people expect Bitcoin to be the next big thing.
What is it?
Before we go any further, we need to explain what Bitcoin really is. The simple explanation is that it’s a software. It would be best if you didn’t think that it’s digital money because every time it’s mentioned online, websites attach a shiny gold coin with a modified dollar sign.
Unlike any of its competitors, this software is the best attempt to create digital money. The way they did it is through cryptography. That’s the science behind codes and how to crack them. Another thing you’re going to hear a lot when this term is mentioned is blockchain.
That’s essentially blocks of information that are made from ones and zeroes. They’re arranged chronologically, and they can contain pretty much anything. That ranges from bond trades, emails, certificates, and similar things. The reason this is such a breakthrough is that it enables any type of contract between two people to exist in the digital plane.
There won’t be any need for a third party such as banks. You could give out loans, credits, and even
checking accounts without the help of an intermediary. Bankers hate this progression because it will make their services irrelevant. Now, Bitcoin still isn’t going in that direction. Instead, it always places itself on the market as a payment system and a store of value. Follow this link for more info
Why does it have value?
In order to answer this question, we need to back up a little and define what we view as a currency. A currency is something, it could be paper, it could be bottlecaps, or it could be precious metals that will be a reliable way to maintain value. In essence, if a lot of people agree that something has value, and it will continue to do so for a long while, it can be thought of as currency.
A few centuries ago, that was gold. People had to carry small sacks of it and pay for their needs from what they had. Next, we invented paper money, which was printed to the worth of gold that a country had. Again, it was an agreement, and everyone started using it. People could carry more of it, and it was suddenly more useful than gold.
Now, we don’t even have to carry printed bills because we have credit cards. These electronic payment methods are starting to revolutionize the world. The number you see digitally on the screen could be transformed into the same amount of physical bills if you wanted to do so. Gradually, countries started to go away from the gold standard, and they introduced currencies that are now classified as fiat.
That means that the money isn’t backed by gold or any precious metal. Instead, it solely relies on the faith that the people of that country, as well as every other one in the world, will accept it. You can read this for more info. The dollar is one of those, and most of the other major currencies are classified as fiat.
What are the pros and cons of cryptocurrencies?
Investing in Bitcoin is something that you might want to do. It’s a great way to diversify your assets, and it looks quite promising. When it first started, one bitcoin was worth nothing. Fast forward to 2017, and it was worth 1600 dollars. Today, it’s worth around 11 000 bucks.
It progressively gets bigger, and it’s going to get bigger as time goes by. That’s because there’s a limited amount of these coins. There are only going to be 21 million of them. Now, people have mined around 18 million of them, and another million is going to be mined around 2021 or 2022.
Many experts predict that by 2030, these digital coins are going to be worth somewhere from 100 000 USD to 500 000 USD. Now, that’s a lot of money. However, another thing that’s worth mentioning is that the market is volatile. If people decide to turn away from the platform, it will lose a lot from its value.
There are experts on the opposing side that claim people’s craze for cryptocurrencies is over, and the price will only go down from the record high of 16 000 in late 2017. They also say that even after a decade of its existence, this digital currency still hasn’t replaced a real fiat one. Still, no one can predict the future. The best way to secure a great retirement is to diversify your assets into precious metals, real estate, bonds, as well as cryptocurrencies.