Bitcoin is a digital currency that was created without the help of a central bank. The Federal Reserve is in control of America's monetary system, whereas Bitcoin is overseen by no single person or organization.
It's worth considering why Bitcoin was established to understand why this is. Satoshi Nakamoto, a person who goes by the pseudonym Satoshi, published a white paper in 2008 outlining their vision for bitcoin. They imagined a world in which people could send each other electronic payments without utilizing a bank or PayPal. (Keep in mind that this was in the immediate aftermath of a worldwide economic crisis triggered in large part by banking sector deregulation.)
Lower payment fees would be one of the most significant benefits. The cost of running a bank is high — there are security and office expenditures to consider – and these costs are frequently passed on to customers. His idea was for everyone to have their own bank, with no need for middlemen.
This conveniently brings us to the creation of Bitcoin. To get the cryptocurrency off the ground in the beginning, it took 30,000 lines of code. The technology that powers Bitcoin is referred to as blockchain. To cut a long tale short, this is a publicly accessible, completely digitized database of every network transaction.
So, how many Bitcoins are there in circulation?
The overall supply has been restricted at 21 million since the cryptocurrency's launch in January 2009. Over 18.2 million had already been mined as of this writing. Quick math says there are around 3 million more to uncover — and finding them will become increasingly difficult in the coming years. The final Bitcoin, according to estimates, will be mined in 2140, or 120 years from now.
Bitcoin supporters claim that this is a welcome difference from what many central banks do, which is to basically print additional money. This policy, known as quantitative easing, frequently leads to inflation, meaning that items become more expensive. Proponents say that by having a fixed quantity, Bitcoin achieves digital scarcity, making each coin more valuable. Consider what's been going on with the coronavirus. The demand for hand sanitizer has recently increased, while supply has remained stable. Prices increased as a result of this.
Before we go any further, let's talk about the 18.2 million Bitcoin supply that is now in circulation. Even if they've all been mined, the amount of Bitcoins still in circulation is likely to be much fewer. One estimate from a few years back said that 4 million BTC had already been lost for all time, with another 2 million taken on top of that. This means a third of the mined supply has been depleted. Indeed, they are rare.
How could it suddenly vanish, you might wonder? What is the storage location for Bitcoin?
Simply said, you can spend your money with a private key. The consequences of misplacing this key might be disastrous. If you forget your email password, you can request a reminder; however, Bitcoin does not have this function.
History of Bitcoin's Value
Examining Bitcoin market history is a wonderful way to learn more about the currency. Over the last decade or so, the value of the world's most valuable cryptocurrency has been nothing short of a roller coaster. It's incredible to imagine that in May 2010, one complete BTC could be purchased for a fraction of a cent. Seven and a half years later, the highest Bitcoin price — a stunning $20,000 – was achieved. That's a good return on your money.
In the beginning, a few people made a lot of money. Consider the Winklevoss twins, Cameron and Tyler. In the early 2010s, the twins filed a lawsuit against Mark Zuckerberg and secured a $65 million settlement. In 2013, they licked their wounds by investing $11 million in Bitcoin at a $120 price. Four years later, their BTC had increased by more than 10,000%, surpassing $11,000 per coin. They became billionaires as a result of their actions. Now, who's the one who's giggling?
Laszlo Hanyecz, also known as "Bitcoin Pizza Guy," is one of those trying to put a brave face on things. In May 2010, he paid 10,000 BTC for two pizzas at Papa John's in an attempt to show that Bitcoin can be used for regular purchases. Of course, Bitcoin wasn't worth much back then - it's now worth roughly $8,600 at the time of writing. This essentially amounted to him paying $86 million for two pies... ouch. Hanyecz claims he has no regrets.
What factors influence the price of Bitcoin?
There's one question you're undoubtedly itching to ask right now if you're brand new to Bitcoin. How can a virtual currency go from being worth less than a penny to being worth hundreds of thousands of dollars?
That is an excellent query. However, you could make the same argument for other assets like 0'>gold, 0'>silver, or the cash in your wallet. Because it has all of the properties of money, the value of BTC has increased. There is one significant difference: instead of putting your faith in a well-dressed banker, you are placing your faith in a robust system based on mathematical principles. The value of Bitcoin will continue to rise as the number of people interested in it grows, as will the number of businesses that accept it.
Other elements, of course, are at play. For starters, there's an occurrence known as the halving. If you remember from earlier in the essay (and I sincerely hope you did! ), miners are rewarded with BTC when they correctly solve the problem that adds a block to the chain. When Bitcoin was first established in 2009, it was valued at 50 BTC. However, after four years – or every 210,000 blocks – the award is reduced by half. It fell to 25 bitcoins in November 2012, 12.5 bitcoins in July 2016, and 6.25 bitcoins in May 2020.
Assuming that demand for Bitcoin continues robust, this might help prices rise. Typically, the increase in value does not occur immediately; it takes about a year for it to fully take effect. BTC was 8,566 percent higher in the year following the 2012 halving — and 286 percent higher in the year following the 2016 event, as our previous Currency.com piece outlines in greater detail. In May 2021, all eyes will be on BTC to observe what the situation is like.
This isn't the only thing that might drive BTC prices upward. Despite the fact that trade wars are generally disastrous for stock markets – just look at the uncertainty the US-China conflict has created — Bitcoin seemed to surge in value whenever the trade war appeared to escalate. (See our feature on Currency.com.)
What can you do with Bitcoin?
All of this leads us to the most consumer-friendly section of our Bitcoin feature: where Bitcoin is accepted in simple terms.
What can you do with Bitcoin?
All of this leads us to the most consumer-friendly section of our Bitcoin feature: where Bitcoin is accepted in simple terms.
Many stores are beginning to accept this cryptocurrency – and others – as a payment method, despite the fact that Visa and Mastercard (not to mention good old-fashioned $20 notes) continue to dominate payment systems globally. Microsoft, which accepts BTC as a payment mechanism on its Xbox Store, is one of the large names in the US that accepts the cryptocurrency. What's more astonishing is that Bill Gates, one of the world's wealthiest men, has stated repeatedly that Bitcoin is superior to cash. Other companies include Overstock.com, a retailer with $347 million in revenue in the third quarter of 2019.
Major supermarket businesses in Europe have also begun to accept BTC as a form of payment. The most intriguing innovation, though, is how fintech start-ups are developing products like prepaid debit cards, which allow users to use their cryptocurrency anyplace Visa is accepted. It works like this: Jerry enters a store and purchases a $5.99 brick of cheese. His BTC is instantaneously changed from Bitcoin to dollars at the cash register to pay the transaction, and merchants receive it in currency.
When Warren Buffett speaks, many people pay attention. Some crypto enthusiasts, however, have already stated that following the 89-year-advise old's is pointless because "he doesn't use a flip phone or email." The 2020s will be pivotal for Bitcoin in the long run. It'll either be the decade in which it finally breaks through to the public, or the decade in which it crashes and burns after battling to keep its current price.