OPENING AN ACCOUNT ONLINE TAKES JUST SEVEN MINUTES
Open My Account

Which Digital Asset Is Right for You? Part 1: Bitcoin

Estimated reading time: 3 minutes, 32 seconds

You may have heard about Bitcoin (understatement of the year!). The cryptocurrency’s meteoric rise to prominence in this decade has surprised investors in both the traditional and alternative investing space. The same can be said for cryptocurrencies like Ethereum, Ripple and Litecoin and others that experienced major rallies in 2017.

But with the number of cryptocurrency assets increasing every day, some investors wonder which ones are right for their investment purposes. Of course, while Kingdom Trust can’t give advice on what you should invest in, we can provide some general information for your due diligence efforts.

In the first of several educational posts on digital assets, we focus on the most well-known cryptocurrency: Bitcoin.

bitcoin

You’ll be hard-pressed to visit any financial website and not find an article about Bitcoin (BTC). It’s by far the most widely-known digital asset (and has the highest valuation currently), with trading opening recently on the world’s largest futures exchange.

Also, certain retailers already accept this so-called “digital gold” as a form of payment. Some even claim it could replace fiat currency (paper money) altogether one day. Others believe this technology will someday reshape the financial industry as an alternative, not replacement, form of transacting. Whatever the motivation, investors are flocking to this asset, but few truly understand it.

Some key points and features of Bitcoin include

  • Virtual: Some investors still don’t realize this, but physical Bitcoin (i.e. you can touch it) doesn’t exist. Bitcoin is a virtual currency, meaning there are no tokens or notes to hand to others for payment. Bitcoin would be used for an electronic purchase, sale or transfer.
  • First mover: Bitcoin was created in 2009. It’s original intent, which is still relevant today, was to be a peer-to-peer (P2P) version of electronic cash allowing payments to be sent directly from one party to another online and without going through a financial institution.
  • Decentralized: To be clear, Bitcoins are not issued or created by any financial institution or government entity. Bitcoin was the first decentralized cryptocurrency.
  • No double-spend: A significant issue facing previous attempts to establish digital currency was double-spending. Essentially, digital files can be easily duplicated, and digital transactions easily reversed. But the technology behind Bitcoin creates the digital scarcity needed to effectively solve this problem.
  • Blockchain: Bitcoin runs on blockchain technology which securely accepts and authenticates transactions through complex cryptography. This keeps the transactions confidential and prevents alterations. The blockchain is a historical record of all Bitcoin transactions and any new transactions. When a transaction is requested, miners verify the transaction and add it to a “block” of other transaction data on a public ledger. That new block is then added to the existing blockchain, a permanent record unable to be changed or altered.
  • Mining: Bitcoins are generated via specialized computer processing (called “mining”). Miners, or those who use these machines, solve complex cryptographic equations (or “hashes”) to generate Bitcoin.
  • Wallets: Wallets are essentially cryptocurrency bank accounts, storing an individual’s digital asset. Every Bitcoin wallet stores an owner’s Bitcoin private key(s). These wallets are not distributed and shared like the blockchain. Many different types of wallets exist (a discussion for another post), with offline or “cold storage” wallets considered by many to be the most secure. All digital assets held in Kingdom Trust accounts are held in cold storage wallets.
  • Exchanges: Various exchanges exist to make digital asset transactions. They behave similarly to traditional stock exchanges, acting as intermediaries between cryptocurrency buyers and sellers. For security purposes, Kingdom Trust requires that digital asset investments are traded on a leading exchange before being moved into the wallet.
  • Limited supply: Only 21 million Bitcoin can ever be mined. So, just like precious metals, supply is finite.

As with any investment, digital currency assets come with risk, including volatile price swings. Ensure you invest in assets and strategies you understand, and conduct proper due diligence on any asset prior to investing.

If you’re an individual investor ready to explore digital asset investment options, contact Kingdom Trust today. We’re the leader in digital asset custody and were the first in our industry to allow retirement investors to hold digital assets directly in an IRA. We are happy to walk you through the process from account opening to investment and beyond!

Conversely, if you’re a fund manager looking for secure custody solutions for digital currency investors, schedule a call with Business Development. We look forward to working with you!

This site uses cookies to learn how to communicate better with our website visitors and share the most relevant information. By continuing to browse the site, you are agreeing to the use of our cookies. Privacy Policy
You are currently allowing us to set cookies. Privacy Policy