What Is Bitcoin And Why It Keeps Ruling
This article will highlight the huge impact Bitcoin has had on our perception of currency, online payment choices, and the economy in general.
What Is Bitcoin And Why It Keeps Ruling
I would dare to say Bitcoin is a phenomenon that has changed the world. At this point, I can’t tell if it is for the better or worse. Get back to me in a few years, maybe I’ll be able to answer this question then. Right now, I just want to highlight the huge impact Bitcoin has had on our perception of currency, online payment choices, and the economy in general.
You probably come across news, articles, and advertising about Bitcoin every day. For those of you who still can’t figure out what it actually is, let me explain in brief.
To begin with, there are two main characteristics that define Bitcoin.
1) Bitcoin is a currency
It has all the key attributes required of a currency, namely:
- It cannot be copied and counterfeited. In contrast, even banknotes issued by central banks can sometimes be counterfeited.
- You can use it to buy and sell online, just as you would with the US dollar. This is possible because more and more services are accepting Bitcoin as a currency alternative.
- It is long-lasting. Even though Bitcoin has an exclusively digital presence, it is durable in time and doesn’t get spoiled.
- It is of limited availability. Because of its scarcity, one needn’t worry about an inflationary effect, as is the case with currencies proposed by central banks. Although you can generate new Bitcoins through a process called mining, it is difficult to increase Bitcoin volume in a short time. The same goes for gold, which also has a limited volume but can be mined.
- It is divisible and convenient to use.
2) Bitcoin is a digital currency
It’s very important to stress that Bitcoin “lives” exclusively online. You can’t touch it or smell it since it doesn’t have any material equivalent. It was designed to be Internet cash for buying and selling goods.
Although Bitcoin has all the important characteristics of a currency, it’s still very different from the paper money we are used to.
A brief history
Bitcoin started in 2008, but its inception remains shrouded in mystery. It all began with Satoshi Nakamoto, a mysterious guy who remains anonymous to this very day. He is the creator of the peer-to-peer system we call Bitcoin. However, some sources suggest that Satoshi Nakamoto is actually a nickname for a group of people rather than one person. They even name three individuals who applied for an encryption patent and bought the Bitcoin.org domain only three days later. We’ll probably never know who the real creators of Bitcoin and its blockchain system are. But maybe this just makes the whole tale all the more intriguing.
At the beginning of 2009, Satoshi Nakamoto mined the first block from what we now call the blockchain and called it “Genesis”. This is how the first Bitcoins came into the online world. That same year, the first Bitcoin transaction was made, and the cryptocurrency got an exchange rate against the US dollar.
Soon, more and more reputable companies were joining the Bitcoin system. Dell, the popular US-based computer maker, was the first big company to adopt it. The increasing number of corporations that got on board gave strong support to the Bitcoin system in general, driving incredible jumps in its price in the long term.
Bitcoin price performance since 2014
To understand how the Bitcoin system operates, you need to wrap your head around the concepts outlined below.
Bitcoin wallet – this is a kind of an e-wallet, like PayPal but created for Bitcoin. You can install it on your PC or mobile device. During the Bitcoin wallet setup, you’ll automatically get a Bitcoin address (you can have more afterwards). You can share it as a payment address in order to send or receive Bitcoins. It’s important to mention that Bitcoin addresses are used only once.
Bitcoin transactions – the transfer of Bitcoins from one Bitcoin wallet to another. It is the same as any other transaction. To validate a transaction of this kind, you will have to operate with a private key linked to the Bitcoin wallet.
Bitcoin blockchain – this is the main Bitcoin network where all Bitcoin transactions are monitored by everyone. It doesn’t mean that you can uncover the true identity of everyone involved in the system, but you can track all the transactions. This makes the Bitcoin system very transparent.
Bitcoin mining – the process through which you can generate new Bitcoins without paying real money for them. Miners get new Bitcoins in exchange for applying specific software programs to solve mathematical problems based on certain formulas. Each operation should be approved in the blockchain system, which makes it difficult for miners to create too many Bitcoins at the same time. There is a consensus agreement on how the process should be managed technically and chronologically.
Why Bitcoin is important
In less than a decade, the Bitcoin system has revolutionized the concept of money. Today more and more services accept it as an alternative payment. Before listing a few reasons that make it so important, let’s outline some Bitcoin features that set it apart from traditional currencies.
Bitcoin is totally decentralized – unlike other currencies, which are printed and managed by central banks with the involvement of local governments, Bitcoin is not controlled by anyone. There is no government, agency, group of people, individual, or any other entity that has partial or total control over it.
It’s fast and convenient to use – if you hate bureaucracy, then Bitcoin is just the thing for you. You don’t need tons of papers to start a Bitcoin wallet, as you would when opening an account with a bank. In addition, Bitcoin transactions are processed within minutes.
The Bitcoin system is transparent – thanks to the blockchain platform, everyone can track Bitcoin transactions in real-time mode and in history mode.
Bitcoin is about keeping anonymous – despite being transparent, the blockchain system doesn’t require any real name or address. This means you can buy stuff online anonymously.
Fees – in comparison to bank fees, those for Bitcoin transactions are very small. I’d say they are really negligible.
These unique characteristics made Bitcoin famous very fast. Over the years, people and businesses have placed much confidence in it despite periodic troubles. Based on the obvious advantages described above, here is why Bitcoin continues to rule today:
- It has changed everything we know about the digital currency system. It remains at the forefront even at this point.
- It has made it possible to buy online anonymously.
- It has transformed online shopping into an easy and futuristic experience.
- It has opened the door for more cryptocurrencies.
- Thanks to Bitcoin, we have a decentralized system that is not controlled by anyone. For many, this sounds like “power to the people” rather than to the banks and governments.
- It has helped a lot of investors become super-rich. It’s still a good trading opportunity today.
In conclusion, we can say that Bitcoin is not merely a currency, but a phenomenon that has marked the past decade. Some say the Bitcoin price has reached its overbought level, which means the market may be saturated. However, I think that Bitcoin has what it takes to lead the cryptocurrency market in the years ahead. Its time is far from over.