There has never been an asset so secure (other than gold, of course) that it starts seeing its comparisons with the precious yellow metal. When launched, Bitcoin was not making any noise as such, but the recent price surges have made people think a lot about the cryptocurrency in terms of investment.

Let us understand what bitcoin is, why it has seen so many upsurges and most importantly, will it be a good investment in 2021?

Bitcoin was released as a cryptocurrency in 2008. The word cryptocurrency came into existence after bitcoin did. The sole purpose of its invention was to eradicate a third-party bank. When exchange money, two people have to introduce a bank in it at some point of time in their transaction. Whether they take out the fiat currency from an ATM or they transfer the money into another person's bank account, a bank gets involved somewhere.

What if there was a way to successfully execute a transaction without the presence of a third party? That is what Satoshi Nakamoto, the infamous name linked with the creation of bitcoin thought. To date, no one knows who this person or group of people is. They stay anonymous. 

What are the things that are needed to create a system where no third party is involved, and where everyone knows what is happening? First things first, a ledger is required to be accessed by everyone but cannot be changed by anyone.

It should possess all the characteristics of a ledger and have all the security measures in place.

The answer was block-chain technology, the spine of bitcoin, and the respiratory system for many different organisations like Ripple, Ethereum, to name a few. 

Let's understand what Block-chain technology is and how it works:

As discussed above, it is an online ledger that anyone can see. The first-ever transaction that could be recorded on the block-chain still exists and is placed there. 

The ways block-chain works are interesting. It has to be secure, and at the same time, it has to be transparent. Like a vault that everyone has access to, no one has the authority to edit what is in there.

Let us know more about how it works in detail.

Block-chain; Brief:

Block-chain can store any data-exchange on its platform working as a ledger where each exchange is given a ledger spot. Once the data exchange is verified, it gets recorded on the ledger system as a memory block. After this has happened, no one can edit it or delete it. It gets "recorded" on the ledger.

The technology is decentralised and hence uses a peer to peer transaction to ensure that nature. Each device that is connected to the network works as a node. A node is nothing but a computer connected to an individual network. Since the web is the Bitcoin network, each node is called a bitcoin node. 

Whatever that has been mentioned here, does not involve the critical ingredient of block-chain technology, the key itself. A key makes sure that the associated lock cannot be opened without its presence. In the same way, no one can transact bitcoin without the presence of the key. It is generated by users of the node or the users of the network. Apart from bitcoins, the concept of public and private keys is used in many different applications. But since it is very much apt in cryptocurrencies, a significant share of its use goes to the crypto sector.

An individual user uses the private key to access the network and do the work that he intends to do, and a public key helps users identify each other on the network. A user will always get a pair of keys, a public and a private key. 

Both of them have to be kept safe. Understand it this way:

The public key allies you to enter a bank and the private key allows you to withdraw or deposit money in the system. If you lose even one of them, you cannot function.  

Block-chain; the process:

The transaction is initiated by a node or a user when it signed by the associated private key. 

The private key generates a digital signature which is unique, and the node also makes sure that this signature cannot be altered. 

Since each transaction is associated with one digital signature, a change in the transaction will reflect a digital signature change. The certification of the whole process will be jeopardised, hence dismissing the transaction altogether.

After this, the transaction will broadcast itself onto the verifying node. This is the place where the translation is subjected to various validity algorithms, called the consensus algorithms. Once the node verifies that the transaction is valid, it is placed on to the ledger.

With the transaction, comes a timestamp and a unique ID which stop any further alteration in the transaction. The "block", will now link itself with a previously generated block and a link will be formed between the two. A chain comes into the picture, and hence, the technology is called a block-chain technology.

The process of bitcoins coming into existence as a currency is a different process whole together, called Bitcoin mining. Let's read about bitcoin mining in detail.

Mining: 

The people involved in the mining process of bitcoin are called miners. These miners have to solve tough computational puzzles to "unlock" bitcoins to be circulated further. When these miners solve a mystery, they get bitcoins as a currency to circulate and bitcoins. These rewards are haled after every 210,000 blocks of memory are mined.

Mining is not easy and cannot be done on our day to day laptops. The miners have to use high-end systems to mine bitcoins. Sometimes the miners pool their resources to mine bitcoins together, and when it is completed, the miners divide the reward within themselves. 

Bitcoin is not the only cryptocurrency in the market. It shares the top spot with Ripple and Etherium, with Ripple being something very much different than a cryptocurrency and being a cryptocurrency at the same time. As a matter of fact, the market cap of bitcoin is more than $5 billion, give or take a billion.

To invest in bitcoin or not to invest in bitcoin depends on a lot of factors. Firstly, is the investment needed for hedging purposes or is the investment being made in order to generate profits?

The whole idea behind the investment is to either save money or to generate some.

So, first, the trader has to decide what he wants to do with the invested money. He wants to see growth, or he wants to see it being saved in a secure place?

The hedging purposes can be useful, but the market is volatile, and all the investment can be eaten up the market fluctuations. 

On the other hand, if the trader wants to day trade in bitcoins, he might have to use CFDs or futures contracts. One bitcoin is more than $39,000 as we write this. Buying just one Bitcoin won't cut it. The trader has to buy it in large numbers, and since it is not a probable situation for a novice trader to buy a decent amount of units, he might have to look at the trading mentioned above options. Again, CFD's and futures come in with their own added risks. 

Are you looking for a broker that can help you with bitcoin trading? Look no further; we bring you the leading online broker HFTrading. HFTrading was registered as an online broker in 2019 and had been helping its investors ever since. The financial service provider gives its investors a choice to choose from three main trading accounts, the sliver, the platinum and gold. Each account is threaded and tailored by keeping the trader's level of expertise and has different services.

Each account offers different leverage, and the broker earns via spreads which are variable for each account.

HFtrading also helps its new investors by offering an impressive library of audiobooks, on-demand-videos, and economic calendars. Since it is an online broker, most of the trading is done by the very powerful MetaTrader4.