Singapore BitcoinWhat's Bitcoin? In a nutshell, Bitcoin is a digital currency, also known as a cryptocurrency, that's unlike any other fiat currency in the world. There is not one fiat currency in existence that even remotely resembles Bitcoin.
What is it that makes Bitcoin so different from fiat currencies? Well, for one thing (and it's a major thing) Bitcoin is decentralized. This means that there isn't one party, or organization, or government, that runs Bitcoin. There's nobody at the top of Bitcoin that decides on policy, or that in one way or another governs it. Nobody owns Bitcoin, other than the millions of its users. Bitcoin is a peer-to-peer currency.
But if there's no one in charge, then how can Bitcoin users be so sure that there's nobody defrauding the system? How does Bitcoin prevent abuse, theft and subterfuge when transactions take place? Bitcoin derives its security, not from a central authority guarding against deception, but by means of the Blockchain, a digital ledger in which transactions are recorded chronologically and transparently.
This Blockchain is propagated by a system of so-called "miners" and "nodes" in the Bitcoin network. These are basically countless computers that each have their own identical copy of the Blockchain. It's the sheer number of these nodes and therefore copies of the ledger, that renders the Blockchain it as good as immutable.
Why use Bitcoin though? Why is it better than regular currencies?
Well, given that there's no authority ensuring that there's no abuse in the system, transactions by Bitcoin can be done much faster and much cheaper. Whereas banks, Visa, Amex and their ilk, take up to a week to complete a transfer, charging about 3% for their services, Bitcoin remittances are completed in mere minutes and may cost 1% or less.
Think of the savings merchants can make if online sales are carried out in Bitcoin. PayPal charges at least 3% of each sale. By using Bitcoin, merchants retain at least 2% of each transaction. That's a considerable sum at the end of the year.
But there's more.
Bitcoin is a robust store of value too. It's frequently compared to gold in this sense, but in fact, it's better than gold in a number of ways. For instance, unlike gold, which is mined constantly, adding more gold into circulation, Bitcoin is capped at a maximum number of 21 million. And this ceiling will only be reached by the year 2140!
In other words, the number of Bitcoin circulating increases at a known rate and this rate is a more like a trickle. This makes Bitcoin scarce, even finite.
Compare this to most sovereign fiat currencies that are being diluted year after year by having the money printers run at full-bore in an attempt to reduce the immense debt loads of their respective countries. The problem with this is that the inflation this causes hollows out the value of these currencies. Savings, pensions, cash gains, all lose several percent each year. The numerical value of savings may not change, but the intrinsic value diminishes with every passing year.
In other words, fiat currencies, typically, are inflationary. Bitcoin, on the other hand is deflationary.
The other great advantage of Bitcoin is that it's the first global currency. The benefit of this is that once you have some and you're going overseas, you won't need to change any money to the currency of the country your visiting. Bitcoin, once it's ubiquitous, can be used anywhere in the world. Think of the convenience and the money saved from no longer having to pay conversion fees.
If all this sounds too good to be true, worry not, there are some potential concerns as well.
To wit, Bitcoin isn't yet regulated by most governments. Sure, some countries have embraced it wholesale, such as Japan, Switzerland and others, but most countries are taking a wait-and-see approach, are hands-off for now. Of course nobody really knows how this regulation issue will play out.
The other item of interest is Bitcoin's workings. So far, in its decade or so of existence, it's never been hacked or in any ay compromised, but obviously, it's still a nascent development, so more time is needed for the public at large to gain full confidence.
That being said, clearly, Bitcoin has a ton of potential, both as a currency and as a store of value. And it's clear that Bitcoin will play a major role in Singapore's ascent to full Smart Nation prominence. Yes, with Bitcoin there are risks involved. But then, no reward without risk.
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I wrote the above article myself and it expresses my own personal opinions and views on Bitcoin. I am unable to guarantee that the information and/or results will be correct. Furthermore, I do not receive compensation for my writing and I have no business relationship with any of the companies mentioned in above article. In addition, I am not an investment advisor and above article is for purely informational purposes. Investors are advised to personally undertake adequate due diligence, or to consult a financial advisor in order to determine what assets - if any - are appropriate to invest in.