You want it; I want it; everyone wants it. It’s Bitcoin! For the last couple of years, Bitcoin has been on the rise. Ever since Elon Musk tweeted out that he believed Bitcoin was the future of currency, people have started investing in it like crazy. Despite the massive investment and an undeniable rise in interest in cryptocurrency, there is so much we still don’t know about Bitcoin. It was built in 2009 by an anonymous person/ persons under the alias Satoshi Nakamoto. While the currency flew under the radar during its early years, its value skyrocketed in 2017. And given the supply cap at 21 million Bitcoins, its value is only expected to continue rising. So, what is Bitcoin, and where did it come from?
What is Bitcoin?
Bitcoin is a peer-to-peer, decentralized cryptocurrency. That means it is not regulated by one institution or organization and can be traded on free markets worldwide. Every Bitcoin transaction that has ever been made globally exists on a public ledger accessible to everyone. Despite being labeled as a “currency,” there is no physical proof of its existence, and like other cryptocurrencies, Bitcoin is not regulated by the government.
How does Bitcoin work?
At its core, bitcoin uses two fundamental technologies. The first is public-key cryptography which allows users to send and receive encrypted messages. The second is blockchain technology which Nakamoto initially developed for trading Bitcoin securely. A blockchain is a collection of data that are grouped into blocks. Each block contains detailed records of bitcoin transactions, including the date, time, buyer, seller, volume, and a unique code used to authorize the exchange.
The exchange takes place via peer-to-peer (PtP) networks, meaning that it’s sent directly from one person to another without any third-party service. It works similar to how banks send money across continents via vast server farms all connected through a central hub, with each node working at lightning speeds. These transactions are then recorded on the blockchain. And since the blockchain is completely decentralized, everyone with a link to the blockchain can add to it. As more and more people add blocks to the blockchain, your information will also get updated over time.
Is Bitcoin secure?
The idea that anyone can add or edit the blockchain may seem like a security breach waiting to happen. But on the contrary, it’s what makes blockchain and bitcoin so secure. For a transaction block to be added to the blockchain, it must be certified by a large majority of Bitcoin holders. In addition, the codes which are used to authorize Bitcoin transactions must adhere to the encryption standards set for Bitcoin. Statistically speaking, a person has a better chance of winning the lottery nine times in a row than being able to guess the codes for a Bitcoin transaction. But in the unlikely event someone cracked the system, Bitcoin miners would branch off to a new blockchain.
What else do I need to know?
It may sound simple enough, but people are still struggling to get their heads around Bitcoin. And with so many new cryptocurrencies out there all offering something different, it’s no wonder people are finding things a little difficult to understand these days! Here are some facts about Bitcoin that you need to know:
– Only 21 million bitcoins will ever exist. This hard cap was kept by Nakamoto when creating Bitcoin.
– The value of one single Bitcoin started at under $20 but has now skyrocketed above $60,000. The ever-increasing demand and a limited supply of 21 million means that its value will continue rising over the coming years.
– Bitcoin is already being accepted by several governments worldwide as an official currency for trading goods and services. However, it’s still unregulated, meaning there aren’t any laws about how you can or cannot use them! In other words, they’re open to being used anonymously without anyone knowing unless someone chooses to report their transactions on public forums like blockchain.
Will Bitcoin ever replace real currency?
While Bitcoin is a great idea and has its fair share of benefits, it’s not necessarily replacing real currency anytime soon. This isn’t just because you can’t use Bitcoins as a medium of exchange, but mainly there aren’t enough people using cryptocurrencies yet! And the ones who are still don’t have much faith in their value over time.
Yet, the most significant barrier to using Bitcoin as a real currency is not its fluctuating value but rather its creator. To date, nobody knows who Satoshi Nakamoto is. This is one of the most significant reasons many people have a hard time believing in cryptocurrencies. Since there is so much we don’t know about Bitcoin, the risks associated are huge. How can we know that the creator didn’t include a code that would eventually render Bitcoin and blockchain technology useless?
Any commodity to replace currency needs to be secure, have the same value over time (disregarding inflation), and be accessible to people worldwide. However, Bitcoin fulfills none of those standards. Would you spend $5 if you knew that its value could increase to $10 tomorrow morning? Or conversely, would you accept $5 if you knew its value could decrease to $4 tomorrow?