Why Use Bitcoin?

(Source:scientificworldinfo.com)

With extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interest include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech). For the past few years, Thomas Wettermann has focused on the underlying technologies that support and promote all phases of cryptocurrency ecosystems.

Why Do People Use Bitcoin?

Some people like Bitcoin because it represents a decentralized transaction and there is no third-party gatekeeper like a bank or a credit card company that is required to validate a transaction. There is, therefore, no bank or credit card fee to complete this transaction.

Proponents of Bitcoin also like the fact that personal information is not traceable for blockchain transactions. Transactions on the blockchain can be used to confirm that a given transaction occurred and the amount that was transferred from one location to another location. However, the identity of the person or persons behind the transaction cannot be identified. As such, there is no potential risk of identity theft. Bitcoin is also slowly becoming a global currency.

As a global currency, the value of Bitcoin is the same no matter where the transaction takes place anywhere in the world. And importantly, no government or banking institution can directly affect the value of this global currency by merely creating more Bitcoin. As described earlier, there will only be a fixed amount of Bitcoin in existence: 21 million BTC.

Can Bitcoin be Used as an Inflation Hedge? 

Inflation causes fiat currencies to lose their value over time. For example, US inflation today is estimated at 7.5%. So, if you hold one dollar in your pocket today, one year from now that dollar will only be worth about 92 cents. Unlike Bitcoin, fiat currency gets its value from a central governing authority, most often from a government-controlled banking system. For one reason or another, these banking systems can print an unlimited amount of the currency which tends to devalue the currency in the form of inflation.

Crypto backers argue that, unlike these other traditional government-backed fiat currencies, Bitcoin is designed to have a limited supply. Because of this limited supply, Bitcoin cannot be devalued by a government or a central bank printing access coins.

Unlike most fiat currencies, Bitcoin therefore can act as an anti-inflationary currency. Similar to certain precious metals like gold and silver, Bitcoin will not lose its value over time. That is why in the crypto world, some refer to Bitcoin as “digital gold.”

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Trading digital financial assets such as cryptocurrencies can carry a high level of risk, and may not be suitable for all investors. Before deciding to invest, purchase, and/or trade cryptocurrency you should carefully consider your investment objectives, level of experience, adversity to risk, and volatilities. The possibility exists that you may sustain a loss of some or all of your initial investment; therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with cryptocurrency trading, and seek advice from a qualified and independent financial advisor.

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