Investing in Bitcoins and Other Cryptocurrencies (Philippines)

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Investing in Bitcoins and Other Cryptocurrencies (Philippines)
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Bitcoins and other cryptocurrencies are all over banner ads on websites and blogs. Well, the same ads are occasionally displayed on the pages of this blog. Got my AdSense account reinstated! So, I did a little reading about these digital currencies.

To tell you in advance, I haven’t found bitcoins and other cryptocurrencies a good investment yet because of the potential problems I came across while doing my research:

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  • Cryptocurrencies are not fiat currencies, hence not yet regulated by the government.
  • Cryptocurrencies are not yet widely accepted in the Philippines and in other countries.
  • Electronic wallets can be corrupted and lost, so the bitcoins (consider hard drive crashes and viruses).
  • Bitcoin decentralization poses an extremely high level of risk.
  • and many others…

Notwithstanding this early assessment, I’ll still detail out here what I learned about cryptocurrencies and bitcoins, so to help you in making informed decisions about your investments. After all, there are even opportunities to make a fortune out of high-risk ventures.

Understanding Cryptocurrencies and Bitcoins. Generally, cryptocurrency (a subset of digital currencies) pertains to a digital asset used as a medium of exchange by means of cryptography – a secure computer technique that controls the creation and transaction of currency units. Compared to debit or credit card payments, cryptocurrency payments seem easier because they do not require merchant accounts.

Regarded as the first decentralized digital currency, Bitcoin is a global cryptocurrency and payment system that allows peer-to-peer payment on products and services by its users without central repository, authority, or middlemen, hence an internet or digital cash.

For most digital natives, Bitcoin (the provider) can be compared to a simple mobile app or computer program that provides a personal cryptocurrency wallet and allows sending and receiving of bitcoins. However, behind these simple terms exists a complicated ‘block chain,’ a publicly shared ledger that records all transactions that, accordingly, are safe and secure due to digital signatures that correspond to actual addresses.

In a conventional financial setting, say in the Philippines, the government through the Central Bank of the Philippines (Bangko Sentral ng Pilipinas) simply prints paper money and metal coins whenever needed. In cryptocurrency, bitcoins are created through ‘mining’ or the process of securing the network transactions by solving proof-of-work problems (computationally-intensive math problems, usually possible in two or three days).

Accordingly, each time a miner solves a Bitcoin’s proof-of-work algorithm, he receives a block reward or an number of bitcoins agreed upon. Only bitcoins compensated to the miners can be rolled over in addition to already generated bitcoins, hence no other means to bring counterfeit bitcoins into the supply.

Investing in Bitcoins. Honestly, I don’t think that cryptocurrencies are a good investment though many have already earned a fortune from them. Inarguably, they carry risks just like any other modern payment methods and currencies.

However, there are three possible ways of getting into bitcoin ventures: (a) you can mine your own bitcoins using specialized hardware and joining mining pool, (b) you can also buy bitcoins directly from a bitcoin exchange, online broker, or other individuals; and (c) you can invest in funds that have invested in bitcoins.

In the same case with fiat currencies and commodities, the value of cryptocurrencies is no exception influenced by the market forces of supply and demand; however, may be more volatile because of the relatively small market size. Equally important, the fundamental value can be impossible to assess as it is only based on utility, not on tangible assets.

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Cryptocurrency Companies in the Philippines. Locally, there is a growing number of cryptocurrency and bitcoin companies. To name a few, we have:

  • coins.ph, one of the Southeast Asia’s leading mobile blockchain enabled platforms that provide local payment networks and bitcoin buy and sell transactions;
  • rebit.ph, a service of Satoshi Citadel Industries, a Philippine-based holding company that furthers the growth of bitcoin ventures in the country; and,
  • bitmarket.ph, a local provider of electronic payment options to small and medium-sized enterprises using bitcoins.

Truly, our society has been moving towards a cashless economy. With cryptocurrencies, one can have irreversible, paperless, and quick transactions. However, several yet unexamined disadvantages and risks make these digital currencies sometimes misdefined as scams. Speculators or risk-taking investors can take advantage of the volatility of bitcoins, but serious investors remain warned by the risks.