Hello friends, in next 5 minutes you are going to have a pretty good idea about Bitcoin, how it came about and everything in between. Most people that I have interacted with, thinks that Bitcoin is quite recent, but it’s not. Well, let’s know the full details of Bitcoin.
Who and when invented Bitcoin
It was invented in 2009, just a few months after the Great Depression of 2008 by an unknown person who goes by the name Satoshi Nakamoto.
Even though the name is Japanese no one knows the true identity. Most of the peoples believe that Mr. Nakamoto has mine 1 billion Bitcoins before giving out to the public. Which could make him the first Bitcoin billionaire in the world, if true.
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What exactly is Bitcoin
In Layman’s terms, Bitcoin is a digital currency. But to really understand what a Bitcoin is, you need to understand two simple terms-
Decentralized means there is no central authority like the Federal or Reserve bank to control Bitcoin prices. For example in case of a traditional currency like dollar or rupees, there is a centralized bank which authorizes the currency, you may consider it like downloading music from mp3 website. There are people who need the file and then there is only one server to manage it.
On the other hand Bitcoin BitTorrent network, when you are downloading a file over BitTorrent you are not downloading it from one specific server but instead there are many other people like yourself who have parts of the file in their computer.
What is Cryptocurrency
Cryptocurrency means it connects buyer and seller through encryption keys. So, assuming if a normal currency could be faked by producing fake notes that exactly look like the real ones and we all know what happens. Cryptocurrency, on the other hand, couldn’t be faked.
So far no one has been able to break the encryption of cryptocurrency. In short, Bitcoins are not like the coins in your wallet. Instead, it is a form of digital currency that nobody controls and it is impossible to fake.
How Bitcoin made
Unlike a traditional currency, Bitcoin is not issued by a central bank. Instead, so many miners over the world are mining Bitcoin using powerful computers connected to the internet. By mining I don’t mean digging out gold or printing paper notes, instead it is equal to solving a complex mathematical problem. But mining Bitcoin is not too easy.
Apparently, you need a specialized software and a powerful electronic hardware, which continuously runs over the 24×7 hour and consumes a lot of power. The miner currently gets 12.5 Bitcoin for each block which is more than $225,000 in December 2017. Theoretically, you also can run the mining software on your personal computer or laptop and smartphones but the amount of power it is going to use and damage it is going to cost to a device is much higher than the price of Bitcoins you are going to make.
What determines the value of Bitcoin
At the beginning of the year 2017 one Bitcoin was trading at 1000 US dollar. And at the end of the same year, it was trading at $19,000. So how does one determine the value of Bitcoin? Well, ultimately the value of anything is determined by how much a buyer is going to pay for it.
In most cases the Government or the organization set up the price for a product or services after calculating the expenses and the market situation. But since Bitcoin is completely decentralized, its value is determined by the public demand.
If more people invest in Bitcoin then the price is going to exponentially higher than usual. And if the number of investors decreases then the value of Bitcoin decreases. So if no one cares about Bitcoin, it could be worth next to nothing.
However, the protocol established by Satoshi Nakamoto dictates two rules–
- The software is designed in such a way that only 21 million Bitcoins can be ever mined and about 12 million of it has already been mined. Meaning only less than half of it’s left to mine.
- The amount of awarded Bitcoin decreases over time. Meaning, initially when the miners solved one block(Blockchain i.e: one big mathematical calculation) they were awarded 50 Bitcoins and it continues for 4 years. And after four years, for solving one block they were awarded 25 Bitcoins and from the year 2017 miners are getting 12.5 Bitcoins for solving 1 block. And after 3 years it’s going to be 6.25 Bitcoins for each block. Simply put, block reward is halved every four years, cutting the miners earning in half as well, and assuming that the demand continues to grow but the supply of Bitcoin is less profitable now. You would see a sharp increase in the prices. Which is exactly what is happening here.
Where to buy Bitcoin
Now I think you have understood the basis of Bitcoin. And you might be interested in buying some Bitcoin. Well, I don’t recommend you to buy bitcoin. But it’s absolutely your choice. Although I must warn you that Bitcoins price is volatile(increases or decreases every moment). And trading in Bitcoin is fully risky. Maybe you will get nothing in return. So please think about it before trading in Bitcoin.
In general, you need a bitcoin wallet to buy or sell BTC. In India, you can use certified wallet like Unocoin, Zebpay etc. Once you create your wallet on Unocoin or Zebpay or any other BTC trading website you must need to verify your wallet. You have to verify it by uploading scan copy of bank Passbook, PAN card, and Aadhar card. This is only mandatory in India. In most of the western country website you can trade Bitcoin anonymously.
What can I do with a Bitcoin
In an ideal world, once you bought a Bitcoin you can exchange it for some goods and services. However, as of now there only hundred thousand merchants around the globe that accept Bitcoins. Most people are using it as a form of investment rather than buying and selling goods.
Is Bitcoin Legal
Yes, Bitcoin is completely legal. However, due to its volatile and anonymous nature, most of the Government and bankers institutions don’t recommend it. For instance, Bitcoins was once the sole currency accepted on the dark web since it is harder to trace, unlike a credit card transaction. In fact, Reserve Bank of India has issued a clear warning saying that Bitcoin should not be used for any payment or settlement. For now, in general buying and selling Bitcoin is completely legal. However, it is still not accepted as a currency yet.
What is the future of Bitcoin
Bitcoins can be a future or just a fad, while Bill Gates says “Bitcoin is better than the currency”. Investing Pioneer like Warren Buffett advice- staying away from Bitcoin. The truth is nobody really knows, everyone is guessing because this is new for everyone. Personally, I’m not sure about Bitcoins but I do believe cryptocurrency could be a future currency. A good argument is a money always changes its form, from the barter system to gold, to paper notes and maybe cryptocurrency in future. Overall there is a lot to cover. But as of now, you know more about Bitcoins than you ever did before.
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Hope to see you again.