Only 16 million bitcoin was created in 2008, when Satoshi Nakamoto made the software available publicly to the world; and unfortunately, based on the nature of the technology, it is impossible to make anymore bitcoin after releasing the software. At this point, all 16 million bitcoin is already owned by someone or locked away forever on the blockchain because the password to the cryptocurrency holdings has been lost, stolen or forgotten. This means that when you buy bitcoin today, you are actually buying it from someone that is holding a percentage of the existing 16 million, and during this transaction, that person will lose a quantity of bitcoin that is equivalent to the amount of bitcoin that you would will receive.
While you do have the option of storing your bitcoin in a personal bitcoin wallet where you have total control over your bitcoin and the password to your bitcoin, there is also the option of storing your bitcoin on an exchange such as Coinbase, Binance, Bitfinex and Bittrex. Storing your bitcoin on an exchange means that the exchange will be providing you an account and a password to your account, much like a bank; however, in this case, your bitcoin will be controlled at a central point and will be affected by the rules and regulation of the exchange.
An exchange, as the name suggest, also allows the bitcoin holder to exchange bitcoin for fiat currencies, like USD, EURO or YEN; as well as for fiat to be exchange for bitcoin. Exchanges work by providing a platform where a seller and a buyer can exchange value, so when you the buyer makes an offer and the seller accepts that offer, the exchange of value is securely and mutually done via the exchange platform. In these type of transactions, it wouldn’t be fair to say that someone lost their money because a mutual and clear agreement was made before the transaction was done.
But on the other hand, when bitcoin is trade on an exchange as where bets are placed on the price or value of bitcoin, someones gain will definitely be the other persons lost. An example of this would be Exchange Traded Funds (ETF) where participants are able to place their bets on the future price of an asset.
“An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.” source: investopedia.
Bitcoin futures and ETFs surely creates and environment where participants stand to lose or gain money depending on how accurate they are in their prediction of bitcoin future price. The first Bitcoin future contract, offered by CBOE, has already been traded from December 10, 2017 to January 24, 2018 and CME also offered a bitcoin contract that expired on January 26, 2018. So the this type of environment is definitely out there at the moment, but as to which type of exchange we are willing to participate in, that will be up to you and your conscience.
Which type of exchange would you use or currently using to trade your bitcoin? let us know in the comment section below.
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