Bitcoin, the very famous digital currency, has been stirring up financial institutions across the globe in the past few years. Some people believe that bitcoin is that one magical thing that will turn them into a millionaire overnight and on the contrary, detractors claim it’s only a big bubble that is only destined to pop.
So let’s talk about what is bitcoin and why is it all the rage? Bitcoin is one of the digital cryptocurrencies, it basically means that there is no central bank that issues it. Investors buy bitcoin online and also sell it online. Satoshi Nakamoto was the founder of this currency, he released this currency in 2009 and its popularity has immensely increased in the past 10 years. However, it took some time to get recognized and get a transaction. The first recorded bitcoin transaction dates back to 2010 when someone decided to buy two large pizzas for 10,000 bitcoins. Those 10,000 bitcoins are now worth over $170 million,
Since the first transaction, the bitcoin prices have gone up and down drastically. It first hit $1,000 in 2013 but took no time to fall down to $300. This drastic fluctuation is interpreted differently by different investors. Some are intrigued by countless earning possibilities brought by such fluctuations and some see this price fluctuation as a confirmatory sign that it’s just an overvalued bubble and should be sold out.
Unlike normal currency like the British pound, bitcoins are not issued by any bank authority from anywhere in this world. Therefore, a lot of people question how something that is not issued by a bank can be used as a valid currency but those who buy bitcoins do so for this very reason. Bitcoin’s value is not determined by the central banking board instead it’s determined by market forces. And hence why it is of so much value for some investors.
If you are wondering how it all works, let us try to explain. The system regulating this cryptocurrency is decentralized, no one person controls the value, and no one can alter any details of the transaction. When anyone signs up for bitcoin, they get their digital wallet. That wallet is unique and can not be accessed by anyone else. Similar to bank accounts, there is a unique address in that wallet. However, a person can use each address once per transaction, doing so keep the account details secure.
Now you may ask, how is a bitcoin’s value determined? And why can’t people produce their own new bitcoins and use them again and again? The public ledger component of this cryptocurrency prevents people from creating their own bitcoins. Through public ledger component, every transaction is recorded and verified online. All users can see the transactions and know that the bitcoins are not being created or produced randomly.
More people are convinced to buy bitcoins because they see it as a more convenient and secure transaction than debit or credit cards. And since a lot of people don’t trust the government’s cash currency anymore and its value due to constant inflation, they want to move away from it. This gives people a chance to secure their lives in a place where the economy is deteriorating.
