The experimental digital cryptocurrency Bitcoin has been gaining in popularity among online and offline merchants in recent months, and if you are considering putting any of your money into this new digital currency then it is important that you know the risks associated with this type of investment. Learn about three of the risks that investors and early adopters can face from buying real Bitcoins so that you can evaluate this opportunity to see if it is right for you.
You Can Lose Access To Your Bitcoins
There are two main security protocols that are used when you are transacting or making purchases with Bitcoin: There is the public key encryption which is published freely in an open source manner on the internet, and then there is the private password that the user must enter in order to spend from their digital wallet. If you ever lose your private password that allows you access to the Bitcoins in your digital wallet, it can be extremely difficult or even impossible to gain access to that money again due to the level of encryption. This is seen as a positive by some people because if you never forget your password then nobody else has access to your digital wallet except you.
No Bitcoin Transaction Can Be Reversed
When you make a regular purchase with a credit card, it can be possible to reverse that charge at a later date by disputing a charge and receiving a chargeback credit. This is not possible with any Bitcoin transaction because once a transaction is verified it is permanently added to the ledger of Bitcoin transactions known as the block chain, meaning that the only way you could get your money back is if the counter party agreed to refund your money.
Bitcoin Mining Becomes Decreasingly Profitable
Many people who are learning about Bitcoin recently for the first time ask the question whether it is profitable to engage in Bitcoin mining, which is when you run the Bitcoin algorithmic block chain software on your own computer in order to contribute computing resources to the peer-to-peer transaction network. The truth is that mining Bitcoins is not nearly as profitable as it was several years ago, and a good replacement strategy the does not require special hardware is to simply trade the price of Bitcoin instead of trying to mine it. By learning about some of the risks associated with transferring cash into Bitcoins you can decide whether you are interested in this type of digital currency.