Cryptocurrencies like Bitcoin, Ethereum, BNB, and others are attracting a lot of attention. Investors have questions, which is understandable; the following are the most popular ones’ responses.
What connection exists between blockchain and bitcoin
The technology that underpins cryptocurrencies, known as blockchain, is an open-source, public record-keeping system that runs on a decentralized computer network (the internet) and records business transactions between parties in a verifiable and permanent manner. As the records are meant to be unchangeable, blockchain promotes accountability, which has several commercial uses. Despite being often linked to cryptocurrencies, blockchain offers a wide range of potential applications that go beyond payments, such as smart contracts, supply chain management, and financial services. Be aware that owning Bitcoin or any cryptocurrency does not entail making an investment in blockchain technology or any of the benefits it may have in the future.
How is cryptocurrency priced and what is it
Governments create fiat currencies, such as the US dollar and the euro, to be used as legal currency. On the other hand, cryptocurrencies like Bitcoin are “non-fiat,” non-authoritarian types of “digital currency” that may be used for online transactions. The concept of “digital currency” is not new; it sprang from the need for simple, auditable electronic payments via services like credit cards, PayPal, Venmo, and others. However, although cryptocurrencies are controlled by technology, notably cryptology, those payments are linked to fiat currencies handled by central banks. The strength of the cryptography, the total number of cryptocurrency units produced, and the technology that prevents the production of more units, in the opinion of proponents, determine the worth of a cryptocurrency. The value often changes based on supply and demand, much like any traded good (think baseball cards): The greater the price prospective buyers are ready to pay, the fewer apartments there are available.
Why has Bitcoin gained traction
Bitcoin drew supporters interested in innovation and the apparent lack of political control, like many other innovative technology or goods. Trading momentum resulted in a growing, though very unpredictable, price as investors began to see it as a viable alternative to more conventional assets like stocks, bonds, and cash. The media picked up on all of this, which led to increased public knowledge, acceptability, and a market for trading it. Even while organizations as diverse as PayPal, Microsoft, Starbucks, and AT&T accept Bitcoin as payment, such transactions often require a third party processor; as a result, its usage in standard business transactions is still very much an outlier. 1
Who is in charge of Bitcoin
Bitcoin was developed based on a paper published in 2008 by a “creator” who goes by the alias Satoshi Nakamoto, but no one or organization now controls it to make sure its value and liquidity are maintained and it functions as a form of payment. It is managed by a private digital community’s consensus in accordance with rules derived by the community, cryptography, and a computer network. While specific nations may permit the use of Bitcoin as a form of payment, control the conditions under which their citizens may trade or mine Bitcoin, and approve the operation of cryptocurrency exchanges, they do not control or regulate the existence or value of Bitcoin itself or the blockchain code on which it runs. The Bitcoin Foundation advocates for Bitcoin, but it does not manage or regulate how it is traded or valued. The original computer code that created bitcoins is what controls and manages how many are in circulation. Bitcoins are exchanged via one of several digital, decentralized exchanges.
Who owns Bitcoin among investors
Nobody is certain, but a research published in December 2021 by the National Bureau of Economic Research (NBER) found that just 0.01 percent of account holders had 27 percent of the entire amount of bitcoin in circulation.
To sum up
Schwab keeps track on cryptocurrency developments as laws and technology advance. Even though some traders have profited from fluctuations in the price of Bitcoin or other cryptocurrencies (and others have lost money), we advise that the majority of investors continue to view them as speculative assets that are best used for trading with funds that are not part of a traditional long-term portfolio.
