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When you first hear about the work bitcoin or cryptocurrency you might be tempted to know how exactly digital coins are created. Who owns it and how the transactions are validated in the crypto landscape. In this short and brief article, let’s delve deeper into the details of bitcoin and what makes it credit-worthy. After reading this article, you can make an informed decision regarding the crypto investment.
Needless to say, bitcoin is one of the world’s best-known cryptocurrencies as of today. It is the real-life implementation of a decentralized application.
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Before we delve deeper into the topic, we want you to know the crypto market is highly volatile and speculative. Thereby, anyone envisages as a lucrative investment instrument must be ready to lose all his life savings. As a general rule of thumb, it is strongly recommended to invest only that much money in bitcoin that you can afford to lose.
Even though some experienced crypto traders have framed a smart investment strategy to mitigate the losses, but the probability of loss always exists.
Bitcoin was the first decentralized application that was created leveraging the power of blockchain technology. As the name cryptocurrency implies, it unleashes the power of cryptography to secure the transaction. Soon after its inception, many large scale organizations and tech giants such as Walmart, Amazon, and Airbnb envisage bitcoin as the perfect alternative to the traditional fiat currency.
Bitcoin was put forwarded by an anonymous person Satoshi Nakamoto. The real identity of the creator of bitcoin is obscure to all the peoples. The goal behind the development of bitcoin was to create a first peer-to-peer electronic cash transfer system decentralized and transparent.
Bitcoin first came into the picture in 2010. At first, someone attempts to buy one small piece of pizza with 10,000 bitcoins. I think the person who is ready to pay 10,000 BTC just to buy one piece of pizza may be the affluent person today because of 10,000 BTC worth $100 million.
In 2011, Nakamoto publicized the source code of his project bitcoin and makes it open-source. Eventually, millions of programmers across the world can actively contribute to bitcoin.
What exactly is Bitcoin?
Bitcoin is a digital currency that doesn’t exist physically in contrast to the fiat money. Bitcoin is envisaged as the perfect alternative to the fiat money whose supply is governed by the central government. If the government prints too much money and a hefty amount of money chases too few goods then it gives rise to inflation.
Whereas, the supply of bitcoin is governed by a smartly-designed algorithm and the number of bitcoin can never exceed 21 million. Thereby, we can deduce bitcoin is a deflationary asset.
Bitcoin harnesses the hidden potential of blockchain technology to create an ecosystem for both the buyers and sellers. Bitcoin resembles a gold or silver in a way it isn’t created out of the thin air but instead, someone has to invest behemoth amount of capital on the resources to mine “Bitcoin”
The obvious question that might come to your mind is why will someone invest his money on the costly resources to mine bitcoin? This is where the concept of bitcoin mining comes into play. Peoples invest their money on an extremely potent and energy-intensive computer to mine bitcoins. Currently, 16 million bitcoins are in circulation and 5 million more bitcoins can be mined.
The mining process involves solving a complex mathematical problem and the complexity of the problem intensifies over time. Once the complex mathematical problem is solved, a new transaction is added to the block of the blockchain network. Eventually, miners will receive bitcoin as a reward for the time and money he/she has put in.
Unlike the traditional transaction processing systems like Paypal, Visa card, or Master card the transaction occurred in bitcoin is completely anonymous thereby the identity of the sender and recipient are camouflaged from everyone.In order to successfully receive the bitcoin the users have mined, he/she needs to establish a bitcoin address which is a sort of like a virtual mailbox with a string of 27-34 numbers and letters.
We positively hope bitcoin will receive much traction from the mainstream media, institutional and retail investors in the upcoming time. Even though cryptocurrency aficionado strongly believes bitcoin can be effectively used in a monetary system, but there is too much that needs to be done before the massive adoption of bitcoin.