Bitcoin is a viral topic of discussion across social media platforms. But not many know what it really is.
Here are 8 facts that will help you understand Bitcoin better:
1) It is a virtual/digital crypto-currency established in 2009
Bitcoin is a virtual/digital currency that exists as files. More specifically, it’s a cryptocurrency, that utilizes cryptology (a branch of mathematics). It was the first of its kind. Any physical “coins” you may have seen, are novelties which hold no value unless a code is printed on them.
2) There are other virtual currencies, including other cryptocurrencies:
Other major cryptocurrencies are available. The most common names being Ethereum and Litecoin. There are also “versions” of Bitcoin called Bitcoin Cash and Bitcoin Gold. Many others are being launched globally and in time we will see which ones do well.
A few cryptocurrencies to watch out for in 2018 include Bitcoin cash, Zcash, Monero, Ripple and Ethereum.
3) Cryptocurrencies are based on mathematics and are “mined”
Mining involves computers solving very difficult mathematical problems, which is sometimes awarded a Bitcoin. Similar to digging for gold. A very real issue, however, is that it uses massive amounts of energy. In fact, a new study states that the energy spent on mining Bitcoin this year alone surpassed the average electricity consumed yearly by 159 nations. This amount is likely to increase in the future. As more “coins” are mined, the system automatically makes it more and more difficult to mine new ones. In fact, some argue that the energy cost actually exceeds the prize. Once you have a Bitcoin wallet, you can use a traditional payment method to buy Bitcoins on a Bitcoin exchange (e.g. coinbase)
4) There can only ever be 21 million bitcoins.
This is due to the way Bitcoin’s mathematics was designed. Thus artificially creating scarcity. Again, this aspect is similar to precious metals, etc. Every four years, the value of adding a block to the blockchain will decrease by half, as dictated by the Bitcoin protocol. Thus, by 2140 when a limit of 21 million bitcoins is reached, the reward for mining bitcoin will be decreased to zero.
5) It can be anonymous and that brings issues:
Huge sums can be transferred reliably with almost no identifying information of those involved in the transactions. This raises concerns regarding money being acquired by dangerous and illegal parties. Bitcoin has been strongly associated with the “Dark Web”, especially the “Silk Road”, which enabled an anonymous global drug market. Silk Road was launched in 2011 and allowed users to browse the internet anonymously and securely without the risk of traffic monitoring. Silk Road has since then been shut down by the FBI in 2013.
6) It is not backed by any government or tangible asset like traditional Fiat currency:
It is an entirely people driven and decentralized currency. Without being tethered to a nation’s economy, it is able to change rapidly, meaning that those software files may become worthless quickly. On the plus side, it potentially avoids a lot of fees due to exchange rates.
7) Few places actually accept it as currency:
Despite it’s current popularity only a few places accept it as currency such as certain exchanges. The list is growing quickly enough though, including certain huge online retailers.
8) No one knows who the inventor is:
Satoshi Nakamoto is the pseudonym of the developer who created and established Bitcoin. His actual identity is still unknown. Interestingly, at the current valuation of Bitcoin, he is likely to be incredibly wealthy, but due to the anonymity of cryptocurrencies, tracking him down would be difficult and this pseudonym has gone silent. Speculation on his identity has been rampant as Bitcoin’s value has shot up.