Bitcoin is a digital currency that uses a peer-to-peer technology. With Bitcoin, functions like transaction processing, currency issuance and verification are done collectively by the network.
This decentralization makes Bitcoin free from government regulation, but it has a flipside in that there is no central authority to ensure operations run smoothly. Bitcoins are generated through the mining process that requires powerful computers to crunch numbers and solve complex algorithms. Bitcoins are currently generated at a rate of 25 bitcoins for each 10 minutes. It has a market cap of 21 million, a number expected to be reached in 2140.
The Future Outlook of Bitcoin
There is so much debate about the future of Bitcoin. Here is what you should expect as far as Bitcoin is concerned:
The main benefits of Bitcoin are transaction anonymity and decentralization. This made Bitcoin the favorite currency for transacting illegal activities like smuggling, money laundering, drug peddling and weapons procurement. This has attracted the attention of regulatory bodies and other government agencies. In March 2013 for instance, FinCEN come up with rules defining cryptocurrency exchanges, bringing them under government regulation. On May of the same year, DHS froze an account on Mt. Gox, a Bitcoin exchange. The allegation was that it broke the anti-money laundering laws. Such occurrences will continue rising, and Bitcoin will finally come under regulation by government agencies.
Many technological advancements will be discovered and implemented to solve some of the challenges Bitcoin users face. Currently, a person’s digital fortune can be lost in case of a computer crash. Also, hackers can ransack virtual vaults. These challenges will be overcome by new technological solutions.
Adoption by Merchants:
The number of merchants who accept Bitcoin as a mode of payment has increased. However, these are still minor in terms of number. For a cryptocurrency to become widely used, it must gain a widespread acceptance by consumers. However, cryptocurrencies are more complex compared to fiat currency. Due to this, they will deter many people from using them.
Divergent Acceptance Criteria:
Bitcoin aspires to become part of the mainstream financial system in most countries. For a cryptocurrency to be accepted into the mainstream financial system, it may be required to meet a widely divergent criteria. It may be required to be mathematically complex to thwart hacker attacks but easy for consumers to use. It may also be required to be decentralized but with enough consumer protection and safeguards. The cryptocurrency may also be required to maintain user anonymity, without necessarily being a channel for tax evasion and money laundering.
Should you Invest in Bitcoin?
If you are considering investing in Bitcoin, it will be good for you to treat it as a speculative venture. In other words, something may happen and events may not favor you. There is no intrinsic value for cryptocurrency except what a buyer is ready and willing to pay at that particular time. This makes cryptocurrencies like Bitcoin susceptible to huge price swings, with which an investor may lose their investment. However, Bitcoin is receiving a huge drive from its limited supply and a growing usage.