Is Bitcoin Risky? What You Need to Know Before You Invest

IS BITCOIN RISKY?

What You Need to Know Before You Invest

By Siloh Moses

Cryptocurrency is a digital and decentralized type of currency. Cryptocurrencies may be used to purchase and sell items and many investors have also seen their potential to retain and increase value.

There’s this new digital coin being talked about at backyard barbeques, most likely, by the crazy uncle who always seems to be into something new. Today, it’s Bitcoin. Have you heard of it? Probably so! Bitcoin is a type of digital currency called cryptocurrency and today there are dozens of different cryptocurrencies. Bitcoin is the most popular — and the most original — established in 2009. Ethereum, XRP, and Bitcoin Cash are other common cryptocurrencies. Each currency has a distinct purpose: some are intended for usage instead of cash, and others are meant for private, direct transactions. Cryptocurrencies are completely digital, so there is no actual currency or fiat linked to your purchase. Instead, owners hold their currency in a digital wallet and purchase or sell it online. Your wallet may be online (some major exchanges like Coinbase offer an in-app wallet) or offline saved on a USBlike hardware device.

Decentralization is a key bitcoin principle. While a central bank supports most currencies – for example, the US dollar is supported by the US government’s “full trust and loan” – its users maintain and value cryptocurrencies on a decentralized ledger where cryptocurrency transactions are recorded.REALVEGASMAGAZINE.COM

So, is Bitcoin Risky?

In order to answer that question, we first must understand the elements of Bitcoin’s platform (such as Blockchain) on which the cryptocurrency is based. The Blockchain is a decentralized platform, (meaning not owned by any one central organization like a bank or central government), a digital public directory used for and to keep store of data transactions regarding cryptocurrencies.

Every data transaction is recorded by a Node (a networked computer) and those nodes are responsible for recording and completing transactions on the blockchain. The reason it’s called the ‘blockchain’ is because every transaction is recorded in a data block that is time stamped with the transactional data. These blocks of information are strung together linking one block to another; hence, the name ‘blockchain.’

These Cryptocurrency blockchainplatforms have the following characteristics:

• Irreversible: A transaction cannot be reversed after confirmation. There is no safety net.

• Anonymous: Nothing is tied to real-world identities, and everything is digitalized and accessible via the Internet. • Global Speed: The network confirms transactions in a few minutes. Verification and validation are done in-house.

Because they occur in a worldwide network of computers, they are location independent.

• Secure: This method is unbreakable because of strong encryption and large integers.

No Gatekeeper: No one centralized government or financial institutions. Transactions are seamless and done peer-to-peer (no middleman).

Now that you know how Bitcoin transactions take place, we can answer the question; “Is Bitcoin risky?” Short answer, yes, but I would argue…isn’t everything else?

Business Risk:

Speculators wanting to benefit from shortterm or long-term holdings of digital currencies have flooded online trading platforms. A lack of trust in cryptocurrencies can lead to a collapse in trading activity and a sudden reduction in value as they are not supported by central banks, governments, or other institutions.

Cyber/Fraud Risk:

Because Bitcoin is effectively a cash currency, it has attracted many criminals. Some of these cybercriminals can take Bitcoin from individual PCs by hacking into crypto exchanges. As online transactions occur, hackers target people, service providers, and storage places with spoofing/phishing and malware. Investors must rely on their computer security systems and third-party security solutions to secure their cryptocurrency purchases.

Author Bio:

A centralized clearinghouse can reverse a monetary transaction in a coordinated fashion, but a cryptocurrency cannot. Because Bitcoin accounts are cryptographically protected, access to funds in a statement is likely lost or stolen and then removed from the owner.

Market Risks:

Bitcoin trades exclusively on-demand. Thus, market dangers are unique. It is also more volatile than other tangible currencies due to limited acceptability and lack of alternatives, fueled by speculation and stockpiling.

Cryptocurrencies are undeniably here to stay as technology develops. But the dangers remain the same, while some appear to be more significant and higher.

So, Why Use Cryptocurrency?

Here are some reasons that why you should use cryptocurrency:

• You manage your transactions. As the cryptocurrency owner, you are in charge of the places where you send and receive your funds. This transaction is not associated with any other parties, without third party intermediaries this will result in lower and fewer instances of fraud and transaction fees.

• You can track your payments at any time. When it comes to Bitcoin payments, you can see your progress in real-time. In contrast, whereas bank transactions, like check deposits, don’t clear over a few days, with Bitcoin payments clear within minutes. Narrowing down when your money was received and when you are able to spend it.

• Each transaction processes quickly. Transactional rates may vary, but bitcoin transactions typically are rapid. To better comprehend this, consider how cryptocurrencies work alongside credit cards. It might take a few days for credit card transactions to be completed. Money may be sent immediately with cryptocurrency.

• You can make international transactions efficiently. When you travel with regular fiat (USD in this example) and you visit another country, your physical fiat has to be converted over to the exchange that the country uses to be useful in purchases. Bitcoin doesn’t have that problem. It’s universal and can be used to purchase goods where Bitcoin is accepted just as you were using regular cash.

It is no secret that Bitcoin is incredibly volatile – all cryptocurrency, for that matter – is highly volatile and that it is not uncommon to see the price of Bitcoin fall or even go up twenty percent on any given day. But, if you want to talk about the blockchain and the possibilities of what that technology can do in future, we might have a good conversation on our hands.

Do you think cryptocurrencies are risky? Tell me by leaving a comment via email:

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Siloh Moses is the founder of DipsandSticksDaily.com - an active crypto enthusiast who covers the cryptocurrency sector, including Bitcoin, other digital assets, and blockchain-related technologies. He’s an author and has been covered by Future Sharks, INC, VICE, and Entrepreneur Magazine.