I bet you’ve been hearing about Bitcoin and Cryptocurrency for the last 8 months and you’ve been pretending like you fully understand it for the last 8 months.
That’s fine, we’ve all been doing it.
However, as prices continue to fluctuate and millions being made and lost within hours, it might be time to take a deep dive into what this is actually all about. So here we go.
When did it all start?
Announcing the first release of Bitcoin, a new electronic cash system that uses a peer-to-peer network to prevent double-spending. It’s completely decentralized with no server or central authority.
Satoshi Nakamoto, on 09 January ’09, announcing Bitcoin on SourceForge.
Secretive creator and overall badass, Satoshi basically created something that people have been discussing for years. He heralded the dawn of cryptocurrency. He fixed the issues that had surrounded digital currency for decades.
For digital currency, you need a payment network that includes accounts, balances, and transaction. The major problem that every payment network faced was double spending or when one entity spends the same amount twice. A central server was required to ensure this didn’t happen.
However, Bitcoin uses a decentralized network.
Without a server in place, every single entity needs to have the information that a central server usually handles. So how can these entities keep these perfectly coordinated and shared records without a central server?
To put this issue into context, if a single entity in a transaction involving 100 entities does not share the exact record, this process is broken and there is no transaction. Imagine, this with millions, if not billions of transactions with varying numbers of entities happening all the time.
Satoshi managed to do this, and he basically changed the history of currency and payments as we know it.
Yes, but what is it really?
So no one carries Bitcoin in your pocket, it is a digital currency that can be used as payment in certain markets.
How it actually works, is through a network called blockchain. This is an immensely complex online ledger that keeps a secure record of each transaction all in one place. Every time there’s a transaction with Bitcoin, the ledger is updated and a few hundred of these transactions make up a single block.
The important thing is that no one controls these blocks. Blockchains are decentralized across every computer that has a bitcoin wallet, which is only available when you purchase Bitcoin.
The future of bitcoin
21 million.That’s the limit set by Satoshi Nakamoto, bitcoin’s founder. A limit that prevents currency manipulation in order to create inflation, but also creates a potential roadblock to growth, if miners feel they can’t benefit anymore.
However, Snapchat’s first investor, Jeremy Liew, has a prediction that Bitcoin will hit $500,000 by 2030 – raising the possibility that even a small fraction of a Bitcoin might be worth investing in. This potentially makes it a volatile investment, which might not be a bad thing. It provides opportunities for investors to grow their worth.
As we move towards the 21 million mark, it is likely that transaction fees will rise. This can potentially make it feasible for miners to continue to keep the network up and running. With the rise of other cryptocurrency, there is a lot of potential for growth, but the risk associated with this technology is quite high.
However, we’re likely to see Bitcoin become a standard or at least, well accepted payment method. This could result digital games or even the gambling industry utilizing Bitcoin as a payment option. In fact, looking at this analysis of Bitcoin poker sites it seems likely that this will become more popular in the years to come.
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This article has been updated in Dec 2021.