Bitcoin – a word that has become synonymous with money. In the short span of fourth quarter of 2017 to the beginning of 2018 and present, Bitcoin is something everyone’s heard of. They may not know what it exactly is, but most of us have the rough idea that it is or has something to do with money or more appropriately, currency. They’re not entirely wrong as it is a form of currency, albeit, a digital one.
But that wasn’t always the case. Bitcoin as mentioned before, became a lot popular towards the tail end of 2017. The reason for it was the meteoric rise in its value. In November 2017, Bitcoin touched USD 9,000 in value for a single Bitcoin, the highest ever it had achieved since its inception in 2009. Everyone thought it to be the limit at that time; that glass ceiling was broken within a few weeks when Bitcoin touched the USD 18,000mark in December 2017.
As impressive as the above details sound, common folks are still confused on many fronts regarding things like, “What is Bitcoin? Where did it come from? What are its uses? Where can we get them?” etc. Well, for starters, Bitcoin indeed is a type of currency but digital. The technical term for the same would be “Cryptocurrency”. Bitcoin was invented and released by anonymous person or group of persons under the pseudonym Satoshi Nakamoto in 2009.
Bitcoin is the first decentralized digital currency based on peer-to-peer(P2P) system. It is decentralized in the sense that the transactions take place directly between the dealing parties minus an intermediary (Banks, Central Authority etc.).Bitcoin is known as a cryptocurrency as it utilizes cryptography to control the creation of additional units, secure its transactions and verify the transfer of assets.
To put it in simple terms, Bitcoin is a digital currency that utilizes cryptography to encode itself and makes sure it is securely received user at the end. In the case of Bitcoin, cryptography uses advanced mathematical principles in storing and transmitting data in a particular form so that only those, for whom it is intended for, can read and process it.
If these transactions happen, then surely there must be a record of it somewhere? Of course, there is and it’s known as Blockchain. But what is Blockchain? There is no clear definition for it. But one of the best terms to describe is that – it’s a ledger, a public ledger to be more precise. All the Bitcoin transactions that are completed are recorded in this ledger. It can be compared to a spreadsheet, only that its spread across a thousand and possibly more computers.
Coming back to Bitcoin, the creation of new Bitcoins and transactions are interrelated. You see Bitcoin mining is the process which helps create or mint new Bitcoins into the system. The miners have computer equipment specialized in solving complex algorithmic equations or hash functions. Solving these help miners confirm the block of transaction in the system. The system in turn gets secured as miners confirm transactions individually and the network in turn rewards them with Bitcoin for their proof-of-work. Miners basically introduce new Bitcoins into the system.
The current market status of Bitcoins as of February, a single Bitcoin is selling at an average of $9,000 to $10,000 depending on the market fluctuations. The drop from the high of $18,000 is owed to the fact that various countries such as South Korea, India etc. have taken measures to curb or ban Bitcoin entirely. Another reason for the fall in value, was the recent heist of $534 million from the Coincheck exchange in Japan in January.
This caused the value of Bitcoin to plunge as low as $6000 per Bitcoin. The market has been recovering but it’s still as volatile as it has ever been. Plus, long gone are the days where you could mine Bitcoin on your home desktop. The total computing power has risen exponentially since then. Now Bitcoins are mined in multiple machines in a factory or warehouse environment big enough to hold an aeroplane. One of the important factor for Bitcoin is Energy, which is being used to mine the complex algorithms. Its projected that it would use more electricity than the entire world uses today, by 2020.
While mining might not be a viable for individual miners, investing is an option one could go for. But given the volatility of the market and its high risk and reward nature, it’s certainly not for the faint hearted. Bitcoin and other cryptocurrencies like it are a part of the near future, it just isn’t secured yet.
But for the adventurous and resourceful sorts – you’re are free to try.