Bitcoin & Cryptocurrency Overview
Bitcoin and Cryptocurrency Overview
Cryptocurrencies are digital currencies that are recognized as electronic property. They don’t exist in a physical form you can touch, like paper money or coins. But, while you can’t hold them physically, they have value.
According to CoinMarketCap, there are more than 18,100 active cryptocurrencies and over 460 crypto exchanges worldwide. Looking to invest your hard-earned cash but can’t afford Bitcoin prices right now? There are plenty of alternative cryptocurrencies to choose from, such as Ethereum, Litecoin, Dogecoin, Shiba Inu, Monero, and NFTify, to name a few.
Due diligence calls for some research on the cryptocurrency you choose to invest in, as not all cryptocurrencies are equal. For example, some cryptos are more stable than others and consequently make better investments.
Bitcoin is not the world’s first digital currency; however, it has proved to be the most successful thus far. Many attempts, such as e-Gold, have come before, but they all failed. The reason being virtual currency had an inherent problem – it was too easy to double spend.
An example of double spending is sending $100 to one merchant and then reallocating that amount to pay a second merchant. Scammers and fraudsters loved this loophole, but not for long!
On October 31, 2008, Satoshi Nakamoto released a white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System,” outlining a payment system addressing the double spending issue with digital currencies.
It was a brilliant concept that commanded the attention of the crypto community. A little over a week after the white paper was published, the Bitcoin Core software was registered in SourceForge.
The first ever Bitcoin block, ‘Genesis block,’ was mined in January 2009. A few days later, the inaugural Bitcoin transaction was recorded by Block 170 between Hal Finney and Satoshi Nakamoto.
By November 2010, Bitcoin’s market cap exceeded $1 million! Hence, this pivotal moment in its development led to an increased interest in investing in Bitcoin. At this point, the price was $0.10/BTC.
Bitcoin experienced the so-called “Great Bubble of 2011” in June after reaching an all-time high of nearly $32/BTC. Then a mere four days after soaring to its highest price, the exchange rate plummeted to just $10/BTC.
Panicked by losing so much money, many crypto investors overreacted and sold at a loss. As a result, the exchange rate took almost two years to recover and surpass its previous all-time high. However, calmer heads who opted to hang on to their Bitcoins chose wisely, as the value has continued to climb, exceeding everyone’s expectations.
All Bitcoin transactions are conducted on a public ledger, so nothing is hidden from anyone. However, despite this transparency, the irony is no one knows anything about the person(s) responsible for the creative development, and deployment of Bitcoin’s original reference implementation, in addition to the first blockchain database: the mysterious Satoshi Nakamoto.
Many have speculated he is not just one person but rather a collective pseudonym for a group of cryptographic developers. A few have come forward claiming to be Satoshi, but to date, his/their real identity remains an elusive secret.
Why Do Cryptocurrencies Exist?
The concept that cryptocurrencies, Bitcoin, in particular, may eventually adopt or even replace national currencies such as the US Dollar, British Pound, and others is on the rise. This is due to its increasing growth as a viable alternative to traditional fiat currency.
Traditional currencies are backed by central banks and governments, making them prone to corruption and manipulation, among other issues. However, cryptocurrencies exist to address these weaknesses.
Unlike traditional currencies, no governing body backs Bitcoin, which means it cannot be subjected to sudden whims. Bitcoin is entirely decentralized, open source, and transparent. You can see every transaction that has been completed and verified via the blockchain data.
Bitcoin operates on highly complex mathematical algorithms to regulate the creation of new Bitcoins, ensuring no double spending ever occurs on the network (the Achilles’ heel of all failed virtual currencies before Bitcoin).
The Bitcoin code is so secure and advanced that it’s virtually impossible to cheat the system. So if you think you can create unlimited bitcoins, you’re greatly mistaken.
Another issue with traditional currency is that it is unlimited in number. As a result, governments and central banks can print more money whenever they see fit. When more money is printed and enters the economy, it reduces the purchasing power of our cash, meaning we must now spend more for an item that, before the influx, had a lower price tag…the definition of inflation.
Bitcoin, on the other hand, is a very different story. Its protocol states that only 21 million Bitcoins can ever be mined (created), making it a scarce resource. Over time, that scarcity will benefit Bitcoin’s value.
Bitcoins are divisible, like cents to a dollar, much like national currencies. The smallest Bitcoin unit, the Satoshi, is 1/100,000,000 of a Bitcoin. In other words, if one Bitcoin is worth $1 million, one Satoshi will be worth 1 cent; when Bitcoin hits $100 million, a Satoshi will be worth one dollar. It may take some time to get to 1 BTC, but if the price continues to skyrocket, buying a few Satoshis regularly may pay off in the long term.
Being highly portable is another reason why cryptocurrencies are gaining in popularity. While you can do the same with physical money and gold, the pitfalls are obvious. Cryptocurrency offers different virtual wallet choices, all of which you can easily take anywhere you go to make payments whenever and wherever you want.
Even better, Bitcoin is not subject to bank and government regulations. This means no incurring hefty bank fees whenever you send payments to others. Another plus because Bitcoin payments are confirmed within minutes; this eliminates waiting hours or even days for payments to clear or post, unlike traditional banks.
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