When the central bank in Cyprus froze bank accounts and limited the amount of cash that could be withdrawn from bank accounts it created a huge uproar that was felt around the world. If consumers did not have access to money how could they buy and sell the things needed to carry on in our modern world? The reality is they cannot so consumers around the world started to look for safer alternatives to fiat currency. Fiat currency is currency that has no tangible value aside from what the government assigns to it.
Consumers are looking for a way to store their buying power to protect themselves from having bank accounts frozen for indefinite periods of time crypto signal. Many people started trading in Bitcoins. This is a crypto-currency which means it cannot be easily counterfeited but before anyone starts buying into this new currency it would be prudent to understand the risks.
Bitcoins are not issued by any central bank or government so there is no accountability whatsoever crypto signals. If you are dealing with Dollars, Euros or Pounds you have the assurance that the government behind it will honor the debt while Bitcoins do not provide any guarantees at all. The fact that no one truly knows who made this currency so there is no way of knowing whether it could be stolen right from under our eyes.
These Bitcoins are stored inside a digital wallet that can be encrypted on your computer. While this should provide a sense of security if your computer is lost your Bitcoins are gone as well. It is not like a credit card where you can get a replacement and carry on like nothing has happened.
While the security of this currency is a concern by far the biggest worry is the value of it. The perceived value of a Bitcoin can change in a moment and unlike fiat currencies that are backed by hard assets owned by a country if a Bitcoin value drops you have nothing of value at all.
There are a few exchanges around the world that sell and buy Bitcoins, but you should not buy them thinking they are going to rise in value. They are a digital commodity which some would classify as a “fad”. Tomorrow it could lose all its real value and never recover.
So to recap the risks, you do not have any real security with Bitcoins since they are not provided by a government. The value if highly volatile and could be reduced to zero in a heart beat and the simple fact that the currency has only been around for a few years shows it is not proven to be reliable. Have you heard of those who refer to bitcoin as digital gold? Clearly, the crypto-currency is quickly gaining popularity and acceptance in the crypto world. The value of the coin is estimated to rise higher. However, it is also noted that the coin can gain or lose 50% of its value overnight. This causes speculations amongst investors but the coin is nevertheless a ”digital gold”. And to the question of whether bitcoin is a multilayered system, it should be known that bitcoin exists on two main layers. These are the mining and the semantic layers.
This is the layer in which the coin is created. Besides bitcoins, ether is also created in this layer. After creation of the coins, valid blocks of bitcoins are transferred to the ledger. Here, currency generation is done. It should be noted that the currency is generated from transactions which are contained in the blocks of bitcoins. The blocks are known as transaction fees. The currency can also be generated from the network itself, or you can say ”from the thin air”. The main advantage of generating currency from the network is that is provides incentives to the miners.
This provides a very important platform. The semantic layer is the layer in which bitcoins are used as a means of payment. It also provides a platform for bitcoins to be used as a store of value. The layer seems very important, isn’t it? The holders of bitcoin currency sign the valid transactions which signal the start of transferring the bitcoins among the nodes at the semantic layer. The transfer can also be made possible by the creation of smart contracts. The smart contracts transfer the coins between different accounts.