Three Things You Need to Know About Bitcoins

As we become accustomed to buying things online, we find ourselves dealing with different modes of payment. In some sites, you can use “bitcoins,” or digital currency. But what is a bitcoin, and should it be something you should consider investing in?

by Mabel Marquez, 26 November 2017

With bitcoin growing in popularity and strength as a viable currency, is it time for you to start seriously considering it as an option for financial investment?

The bitcoin is a type of cryptocurrency, or digital currency that has caused much curiosity and confusion to those who encounter it as a payment option online, or even as a possible investment opportunity. The reception for it is most certainly polarized, with the likes of American business magnate Warren Buffett calling its value a “mirage,” while celebrities like Gwyneth Paltrow, Ashton Kutcher, and Floyd Mayweather all want to cash in on it. So what is it really?
Essentially, bitcoin is a virtual type of currency that allows you to give or receive payments from another individual without requiring the involvement of financial entities like banks, credit card companies, or even PayPal. By taking out the “middl eman,” bitcoin transactions are practically as simple and straightforward as paying your friend in front of you—only you are doing it online and you can be transacting with anyone, anywhere in the world. 
Apart from the efficiency, the bitcoin is more cost-friendly especially when it comes to international transfers. The sender is relieved of the burden of having to pay additional fees for money transfer. 
Inasmuch as it is super convenient and high tech, however, a lot of people are concerned about how “real” its value is. Bitcoins are, after all, produced by a network of computers using many complex algorithms and computations at dizzying speed. If money is intangible and just exchanged online, can it ever be real?
Below, three essential things you need to know before using and investing in bitcoins. 

1) Creating Bitcoins
Unlike paper money, bitcoins don’t need giant printers, special paper, and sophisticated print designs. There’s no need for financial institutions to certify and put it out in circulation. Instead, all you need are the computers producing bitcoins by going through a mining process (a concept derived from land mining where workers dig under the earth to get natural resources like gems and precious stones) until they reach the cap of 21 million. 
Mining requires going through the block chain, wherein a transaction is added and verified into the public ledger. Simply put, the block chain works as the main repository where records of bitcoin transactions are compiled. This is also where new bitcoins come from before being released to circulation. In the real world, think of it as the Central Bank where money comes from and is regulated. But unlike the Central Bank, which only relies on machinery such as money printers, the miners must solve puzzles in the block chain to get their block reward, which is the bitcoin. Basically, just about anyone can become a bitcoin miner. All you need is a reliable internet connection and a decent piece of hardware, as well as a knack for puzzle-solving. 

2) Bitcoin Worth
Nobody knows for certain who created the bitcoin, although there are some suggestions as to who could be behind it. Among the foremost candidates is Satoshi Nakamoto, alleged bitcoin founder and known owner of the registered domain name bitcoin.org in August 2008. By November, a link was uploaded, which directed to a paper that Nakamoto wrote, entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” Later on, however, Australian computer scientist and businessman Craig Wright came out to claim that he is, in fact, the founder of bitcoin and that Satoshi Nakamoto was merely a pseudonym. 
The first bitcoins were released in January 2009. Back then, only a few hundred bitcoins were in circulation. Things started rolling for this cryptocurrency in 2010. If you invested $10-worth of bitcoin at that time, you would have purchased 3,333 bitcoins, based on the $0.003 price per coin for 2010. 
Fast forward to today, and converting your 3,333 purchased bitcoins to its current per-piece value of, as of this writing, $3,722 and $445 for one bitcoin cash, your $10 would now be worth a whopping $13.9 million! As 2017 nears its end, the bitcoin continues with its impressive surge, now hitting as much as $1,448 per bitcoin value. 
To put things in perspective, if you initially invested in $100 worth of bitcoins, you would now have multiplied your investment by almost 483x the original cost you shelled out. That’s a cool $482,666.67 to be precise.

3) Is It Worth It?
With more and more people wanting to jump on the bitcoin bandwagon, government institutions are now looking at subjecting  bitcoins, as well as other virtual currencies, to tax. The main difference, however, is that virtual currencies will be taxed as property instead of currency, which means that bitcoin capital will earn capital gains or losses, while inventory bitcoins will be subject to regular gains or losses. 
If you want to invest in bitcoins, you’ll have to pay attention to its movement much like you would in foreign currency trade or stocks. As with these other forms of investment, it’s ideal to buy low and then sell high to make the most out of it. You can also earn bitcoins upon receipt of payment for products or services, even for brick and mortar stores. Some have also gotten more creative with their bitcoin transactions, even engaging in lending: direct lending, peer-to-peer lending website, or virtual bitcoin banking.
If you would consider it as sleeping money, or funds that you won’t touch so its value will keep growing, then it’s highly possible that you’ll wake up a bitcoin millionaire one day. That’s virtual money you can convert into cash for actual use.
As with any other type of investment, however, it’s best to approach bitcoins with much care and caution given that it is still very new—and volatile. In 2011, for example, the bitcoin experienced its first price drop at a whopping US$31 to US$2 in a matter of five months. It did eventually recover, of course, and continues to be strong to this day. But that crucial period certainly puts to light how unstable this cryptocurrency can still be. 
If you want to try bitcoins for yourself, buying some is as simple as downloading a bitcoin wallet from official websites. Fill up a form, which is as basic as opening a social media account, in order to open your own bitcoin wallet. Once you have it, you can use your credit card, debit card, or bank transfer to buy bitcoins from the site. The bitcoin equivalent of your cash purchase will then be deposited to your wallet. On the other hand, if you want to sell, you can simply click on the button to make the transaction, and the conversion rate of the cryptocurrency at the time of sale will then be deposited straight to your preferred account.