Bitcoin is a virtual currency that is completely independent from any central authority like government or central bank or middlemen. It is essentially the first implementation of a new form of money that uses cryptography to control its creation and transactions. Like every other digital currency, Bitcoin has a real value and can be exchanged for USD, GBP, or any other physical currency. Supply and demand is the key factor that determines the digital currency’s value. The more demand for Bitcoin increases, the more value each individual bitcoin gets.
The first references to Bitcoin were made by Satoshi Nakamoto who in 2008 released a paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” and a year later introduced the original Bitcoin software.
The cryptocurrency is king when it comes to worth and trading volume. In just a few years, Bitcoin has become one of the hottest trading products as its price has grown exponentially, to worth over $1,000 in early 2017. The end of April 2017 saw the value of all existing bitcoins exceeding 20 billion US dollars.
How Bitcoin Works
The individuals and companies who participate in the Bitcoin network, also known as “miners” solve mathematical problems to discover new blocks which are added to the blockchain and receive a reward in the form of a few bitcoins. The more bitcoins are produced, the more the mining difficulty increases.
The Characteristics of Bitcoin
Bitcoin is entirely open-source and decentralised which means anyone can access the source code at any time. All transactions and amounts can be tracked and this transparency feature is what inspires trust and security among Bitcoin users. All payments are carried out without reliance to a third party, therefore there are little transaction fees and the transfer of funds is performed almost instantly.
The trend of investing in digital currencies like Bitcoins has surged in the recent years as investors regard this type of currency as an alternative to national fiat money and mainstream commodities like gold. Like any other asset, the ‘buy low, sell high’ practice can be applied to Bitcoin. A popular means of earning and owning the currency is through buying on a Bitcoin exchange. Bitcoins can also be received as a form of payment for goods and services or can be gained through the process of mining. Bitcoins are stored in digital wallets which contain an address (something like a bank account number). A private key (similar to a PIN) is attached to each address.
Nine years after the digital currency was introduced, Bitcoin has positioned itself as a highly resilient currency with growing institutional acceptance. Financial experts unanimously agree that Bicoin has huge potential as it has climbed to record highs in August 2017, exceeding nearly three times the price of gold.