As investments and currency goes, Cryptocurrencies such as Bitcoin are risky, not regulated, and also not accepted in many places of the world or for purchases as currency.
However, many use Bitcoin as an investment, a very risky investment.
The higher the risk, the higher the possible rate of return on that investment.
Cryptocurrencies, such as Bitcoin, are an odd animal in the world of money. It is not real, it is virtual, and how it is created is by using computers and checking the “blockchain”, which is what monitors and shows all the transactions. You can even create your own blockchain to create a currency, but either way, it can be expensive.
It takes computers, and electricity to do this, a lot of electricity.
You also need a digital wallet to place your money.
In time this process may be simplified, and it is much too much to address here, but cryptocurrencies are here, and may be here to stay.
But they are not regulated like paper notes, money issued by government banks. In addition, not all places of business will accept them for payment….until now!
This Could Be The First Step
Recently, El Salvador has stated they will accept Bitcoin as legal tender. They are the first country to do this, and in breaking financial ground in doing so, could be taking the first step towards other countries doing the same.
However, there are many concerns.
Cryptocurrencies are still not regulated in the world, and how do you regulate a currency that has no source of origin? No country of origin, it is not technically a part of the world economy. Well….until now.
The El Salvadorian government is giving away digital wallets, along with £22 worth of Bitcoin, to those who download the wallets, in hopes more people will use them.
Bitcoin, as all cryptocurrencies can be very volatile in its value, meaning it goes up and down in value very quickly. This is a huge risk the El Salvadorian government is taking.
As to if other countries will follow and allow Bitcoin or any cryptocurrencies to be introduced into the standard economy is anyone’s guess. For us here in the UK, it would need to be regulated by the government, and also be more stable in its valuations.
Update as of September 8, 2021
It appears that on the first day of El Salvador using Bitcoin as an acceptable currency, there has been a bit of a “crash”, in the value of the cryptocurrency, and also in the infrastructure to accept it as payment.
The value of Bitcoin dropped dramatically, which caused the country to lose $3million!
That is a lot to lose for such a poor country.
You then couple this drop in value with the huge number of people trying to register and receive their digital wallets, and the servers could not keep up with the demand.
Then there are also protesters who do not support the use of the digital currency.
It is an interesting time, and could be quite a bumpy ride to see if digital currency will be used in the country. It also is an experiment for other countries to view.