One of the most trending investments in the last decade has been Bitcoin, the “digital gold” of the 21st century.
This guide explains everything one needs to know about investing in Bitcoin.
The world’s first cryptocurrency
Bitcoin is the first cryptographic digital asset that is built and exchanged on a decentralised peer-to-peer network using distributed ledger technology known as the blockchain.
In 2008, Satoshi Nakamoto, a cryptographer whose real identity remains a mystery, published a whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System where he described the mechanisms of the first completely decentralised digital payment system and its native currency Bitcoin.
In the nadir of the global financial crisis and the US stock market crash, crypto enthusiasts saw Bitcoin as a much-needed alternative to the fiat currencies issued and controlled by governments and as the future of an outdated financial system.
To create scarcity and prevent inflation in the future, Nakamoto hard capped the total Bitcoin supply to 21 million BTC.
Today, over 85% has been mined, but experts predict that the remaining Bitcoins won’t be mined before 2140 because the difficulty of mining keeps increasing. Afterwards, there will be no new bitcoins.
Blockchain technology and Bitcoin mining
Nakamoto was not the first software developer to try to design a functional digital payment system or a form of digital money.
However, he was the first to find the solution to the double-spending problem and create a payment system based on cryptographic proof instead of trust in intermediaries (read: banks).
In his whitepaper, Nakamoto described a revolutionary new technology called blockchain, a public ledger that consists of chained blocks of data (hence the name).
The ledger stores every Bitcoin transaction and prevents third parties from making any changes or removing data.
Blockchain is also where mining Bitcoins takes place. This is done by “miners”, volunteers who operate the network’s nodes and spend great amounts of computational power to run the incoming data through a hash function and solve a complex algorithmic problem.
When the majority of the nodes accept the solution, the transaction is verified and enters the new block. The lucky miner wins a Bitcoin reward for the job.
Where can Bitcoin be bought?
Cryptocurrency exchanges: The most common platforms for Bitcoin purchases are the crypto exchanges.
The Securities Commission Malaysia has approved three Bitcoin exchanges that are recognised as registered digital marketplaces: Luno Malaysia, SINEGY Technologies, and Tokenize Technology.
Luno is a reliable trading platform free deposits and withdrawals and can be made and Bitcoin can be bought and sold for inexpensive fees.
It applies 2FA and cold storage to protect customer funds. Security is the No 1 priority when looking for crypto exchanges. Just remember what happened to Mt. Gox.
On a global level, Coinbase and Binance are the two most widely used trading platforms. US-based Coinbase offers prominent cryptos at an industry average fee of 1.49% and 3.99% for card payments or PayPal. Coinbase is unavailable in Malaysia, but Binance is and has a better choice of altcoins and affordable rates.
Traditional Stockbrokers – Robinhood: Fans of traditional stockbrokers, would be happy to know that some, such as Robinhood, eToro, and TradeStation support Bitcoin purchases.
The fee-free stock brokerage, Robinhood, has allowed Bitcoin trades since 2018. Primarily designed to be used on mobile phones, it recently launched a desktop platform.
Bitcoin ETFs: An exchange-traded fund closely tracks and mimics the price of an asset. A Bitcoin ETF would mean indirectly purchasing Bitcoin with an ETF of the value of Bitcoin without worrying…