Five must-know points about holding Bitcoin and their advantages and disadvantages

In today's society, Bitcoin, as an emerging digital currency, is gradually changing people's trading methods and investment concepts. For those who are considering entering this market, it is essential to understand the basic knowledge of Bitcoin and its advantages and disadvantages. This article will delve into five knowledge points about holding Bitcoin, while analyzing the advantages and disadvantages of Bitcoin to help you better understand this disruptive technology.

First of all, one of the knowledge points of holding Bitcoin is the basic concept of Bitcoin. Bitcoin is a decentralized digital currency created in 2009 by a person with the pseudonym Satoshi Nakamoto. Unlike traditional currencies, Bitcoin does not rely on the support of banks or governments, but is traded and verified through a technology called blockchain. Blockchain is a distributed ledger technology that records all transactions in a secure and transparent way. Each transaction is recorded in a "block", and these blocks are connected by cryptography to form a "chain" to ensure its immutability. This decentralized feature makes Bitcoin more resistant to censorship to some extent, and users can trade without intermediaries.

Secondly, another important knowledge point about holding Bitcoin is the scarcity of Bitcoin. The total supply of Bitcoin is limited to 21 million pieces, a design that makes it similar to the scarcity of gold. As more and more people realize the value of Bitcoin, the demand continues to increase, while the supply is limited, which leads to the rise in Bitcoin prices. Many investors regard Bitcoin as a kind of "digital gold" to fight inflation and currency depreciation. Therefore, it is very important for investors to understand the scarcity of Bitcoin, which affects the supply and demand relationship and price fluctuations in the market.

Third, people who hold Bitcoin need to understand the issue of security. The security of Bitcoin mainly depends on how users store and manage their Bitcoin. Since Bitcoin is a digital asset, risks such as hacker attacks and loss of private keys are always present. In order to ensure the security of Bitcoin, users can choose different storage methods, such as hot wallets, cold wallets, and hardware wallets. Hot wallets refer to online wallets, which are convenient and fast, but less secure; cold wallets are offline storage, which are highly secure but inconvenient to use; hardware wallets are physical devices specifically used to store Bitcoin, which are both secure and convenient. Regardless of which storage method is chosen, users should regularly back up their private keys and take multiple verification measures to reduce the risk of asset theft.

Next, understanding Bitcoin's liquidity is also one of the important knowledge points for holding Bitcoin. Bitcoin's liquidity refers to its trading ability in the market. As a globally used digital currency, Bitcoin has high liquidity, and users can quickly buy or sell Bitcoin on different trading platforms. Especially on some large exchanges, such as Coinbase, Binance, etc., users can trade conveniently without worrying about insufficient liquidity. However, liquidity is also affected by market sentiment, policy changes, and technical issues, so investors should pay close attention to market dynamics in order to adjust their investment strategies in a timely manner.

After understanding the five knowledge points of holding Bitcoin, we cannot ignore the advantages and disadvantages of Bitcoin. First, let's look at the advantages of Bitcoin. The decentralized nature of Bitcoin enables users to trade globally without relying on intermediaries. This approach not only reduces transaction costs, but also increases the speed of transactions. In addition, the security of Bitcoin is relatively high. Thanks to the encryption mechanism of blockchain technology, users' transaction records are transparent and cannot be tampered with.

However, Bitcoin also has some disadvantages. The first is that the price fluctuates violently and the investment risk is relatively high. The price of Bitcoin may rise or fall sharply in just a few hours, which makes many investors feel uneasy when facing the market. Secondly, the legality of Bitcoin is still controversial worldwide, and the regulatory policies of many countries on Bitcoin have not yet been clarified, which may lead to legal risks. In addition, the anonymity of Bitcoin transactions also makes it exploited in money laundering and illegal transactions, which has also attracted the attention of regulators.

In general, the knowledge points and advantages and disadvantages of holding Bitcoin complement each other. Understanding this information can help investors better evaluate the investment value of Bitcoin and make wise decisions. In this rapidly changing digital currency market, it is essential to maintain the ability to learn and adapt. With the continuous development of blockchain technology and the maturity of the Bitcoin market, future investment opportunities will be more diversified, and investors need to remain vigilant at all times to ensure the safety of their assets.

In the days ahead, Bitcoin will continue to play an important role in the global financial system. Despite the many challenges, its potential cannot be ignored. For everyone who intends to enter this field, understanding the basic knowledge of Bitcoin, market dynamics, and related risks is the key to successful investment. I hope that through the analysis of this article, readers can have a deeper understanding of Bitcoin, seize the opportunities given by the times, and make rational investment choices.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

What are the five major knowledge points about Bitcoin? Introduction to Bitcoin's advantages. For a long time, Bitcoin as an anonymous currency was only used in the dark web, but this is gradually changing, as Bitcoin has a greater position and role in the mainstream market than in the dark corners. The growth of Bitcoin as an asset, and the technology behind it, has attracted the interest of many forward-thinking and progressive companies. Companies like Microsoft, Overstock.com, DISH Network, Intuit, and even PayPal's competitors are supporting Bitcoin payments. Let's take a look at the five major knowledge points about Bitcoin? Introduction to Bitcoin's advantages.
Knowledge Point 1: Is the supply of Bitcoin limited?
According to Bitcoin's rules, there will only be a maximum of 21 million bitcoins produced by computer mining, and they will never increase again. This statement is not wrong in terms of rules, but not necessarily in terms of politics.
The Bitcoin protocol can be modified through collective consensus. The Bitcoin protocol can be modified as long as the majority of participants in the Bitcoin network decide to do so, and the regulations have been modified several times.
Currently, Bitcoin does maintain a limited supply under the consensus of the majority of users, but the guardian of this rule is politics rather than mathematics.
If the Bitcoin community agrees with mainstream economists, the political landscape could change.
Economists believe that Bitcoin will gradually decrease over time due to various unexpected factors, and under the condition of limited supply, Bitcoin will fall into deflation.
Some new cryptocurrencies have chosen not to limit supply like Bitcoin, but to follow the monetary policy of low, stable inflation advocated by economist Milton Friedman.
So don’t be too surprised if one day you see that the supply of Bitcoin is no longer limited to 21 million.
Knowledge Point 2: Can Bitcoin users remain anonymous?
Since Bitcoin transactions do not list real identities, the privacy of users is protected. Bitcoin users can create countless pseudonyms according to their needs, and most Bitcoin software will create a pseudonym for each transaction.
Even WikiLeaks encourages sponsors to donate in Bitcoin, because Bitcoin's anonymous nature makes it difficult for outsiders to easily grasp the identity of sponsors. But in fact, most Bitcoin users do not have better privacy protection than traditional bank transfers, and even have worse privacy than pure cash transactions.
Because blockchain research can link users' pseudonyms together, some blockchain analysis units have begun to provide this service to law enforcement agencies.
More importantly, most users will go through KYC (Know Your Customer) when buying Bitcoin or selling Bitcoin for USD or other legal currencies.
In order to prevent money laundering and bribery, the customer) program will leave a verifiable identity, so if you really want to track it down, there will still be a trace.
While technically capable users can exploit coin-mixing protocols to exchange coins with other users in order to conceal their identities, this practice is not common.
In addition, some cryptocurrencies provide stronger privacy protection mechanisms than Bitcoin, but are currently less popular than Bitcoin.
Knowledge point 3: Bitcoin is not controlled by law?
Bitcoin is the main currency in the dark web black market. French financial regulators have criticized Bitcoin as a tool for criminals, and Nobel Prize winner in Economics Joseph Stiglitz has publicly stated that Bitcoin should not be legal.
But in fact, the emergence of new technologies always makes it difficult for existing laws to regulate, just like when cars, computers and the Internet first appeared. Gradually, these new technologies will be included in the scope of the law, and Bitcoin is also going through this process.
Bitcoin trading is already regulated by law in several states, including New York, and all major exchanges at least try to comply with KYC procedures to prevent money laundering.
Bitcoin was recognized as taxable property in 2017, so it is absolutely an illusion that Bitcoin is not subject to legal regulations. Many countries have also begun to actively formulate laws and regulations related to virtual currencies. For example, Japan
The Payment Services Amendment Act was signed in June, legalizing Bitcoin and strengthening regulatory procedures.
Knowledge Point 4: Does Bitcoin waste energy?
Bitcoin miners need to consume a lot of electricity to calculate the cryptographic puzzles of the blockchain to mine Bitcoin. Some reports have shown that the energy consumed by a single Bitcoin transaction is as much as that of 3
Some even believe that Bitcoin will use up all the world’s electricity in a few years.
Regarding the claim of wasting energy, we should also know that although the current currency does not seem to consume much energy, there are some hidden costs that have not been calculated. For example, the custodians hired by banks also consume a lot of manpower and material resources.
However, these are seen as necessary costs of the financial system, not waste. Conversely, the energy consumed by Bitcoin is also necessary to maintain this distributed system.
The best-case scenario, of course, would be to find a way to keep Bitcoin transactions running without consuming so much energy, or to find a more environmentally friendly cryptocurrency to replace it.
But until then, this energy is a necessary expense for using Bitcoin.
Knowledge Point 5: Will Bitcoin replace credit cards and cash?
Many Bitcoin supporters believe that Bitcoin will one day become the most important payment method, and the old cash and credit cards will become history. But in fact, Bitcoin does not have the conditions to become a universal payment method at present.
The biggest problem is the transaction processing speed. The current design allows Bitcoin to process only a few transactions per second, far less than the credit card network that can process tens of thousands of transactions, and it is even more unable to handle the large number of cash transactions that are carried out every minute in various regions.
Although the Bitcoin community has plans to improve transaction processing capabilities, an effective consensus has not yet been reached. In addition, due to the limitations of blockchain features, Bitcoin transactions will not take effect immediately. On average, each transaction requires 10
It takes minutes to complete, and when users have additional security requirements, it may take more than an hour. Although these problems can still be improved, it is still difficult to determine whether Bitcoin can become a universal means of payment, let alone completely replace credit cards and cash.
At least for now, Bitcoin is more like a valuable reserve asset such as gold or government bonds than a currency used in daily life.
WHAT ARE BITCOIN’S BENEFITS?
Freedom of Payments - Instantly pay and receive any amount of money, anywhere, at any time. No bank holidays, no borders, no imposed restrictions. Bitcoin allows its users to have full control over their funds.
Very low fees
- Currently, there are no or very low fees for processing Bitcoin payments. Users can include the fee in the transaction to get priority processing and receive transaction confirmation from the network faster. In addition, there are merchant processors that assist merchants in processing transactions, converting Bitcoin into legal currency every day and depositing funds directly into the merchant's bank account. Because these services are based on Bitcoin, they can offer much lower fees than PayPal or credit card networks.
Reduce the risk of merchants
-Bitcoin transactions are secure, irreversible, and contain no sensitive or personal information about customers. This eliminates the need for merchants to lose money due to fraud or fraudulent chargebacks, and there is no need to comply with PCI standards. Merchants can also easily expand into new markets where credit cards are not accepted or where fraud rates are unacceptably high. The end result is lower fees, a larger market, and less administrative costs.
Security and control
-Bitcoin users have full control over their transactions; merchants cannot force fees that might be unnecessarily or unnoticeably charged with other payment methods. Bitcoin payments do not require personal information to be tied to the transaction, which provides a great defense against identity theft. Bitcoin users can also protect their funds through backup and encryption.
Transparency and neutrality
-All information about the Bitcoin money supply itself is stored in the blockchain and can be verified and used by anyone in real time. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically protected. This allows Bitcoin Core to be believed to be completely neutral, transparent, and predictable.
WHAT ARE THE DISADVANTAGES OF BITCOIN?
Acceptance
-There are still a lot of people who don’t know about Bitcoin. Every day more businesses are accepting Bitcoin because they want to benefit from it, but the list is still small and there still needs to be more businesses supporting Bitcoin in order to benefit from the network effect.
Volatility
-The total value of Bitcoin in circulation and the number of businesses using Bitcoin are still very small compared to their potential size. Therefore, relatively small events, transactions or business activities can significantly affect its price. In theory, as the market and technology of Bitcoin mature, this volatility will decrease. The world has never seen an emerging currency before, so it is really difficult (and exciting) to imagine how it will progress.
In the development stage
-The Bitcoin software is still in beta, with many unfinished features in active development. New tools, features, and services are being developed to make Bitcoin more secure and accessible to the general public. Some of these features are not yet available to every user. Most Bitcoin businesses are new and do not yet offer insurance. Overall, Bitcoin is still in the process of maturing.

Finally, the knowledge point of holding Bitcoin also includes understanding the Bitcoin market. The Bitcoin market is a highly volatile market, and price fluctuations may change dramatically in a short period of time. Investors need to understand the fundamentals and technical analysis of the market in order to make wise investment decisions. In addition, market sentiment will also have an impact on the price of Bitcoin, such as news reports, social media discussions, etc. Therefore, it is crucial for Bitcoin investors to maintain market sensitivity and the ability to analyze information.