Introduction to Bitcoin
The world of money is undergoing a revolution. Although the designs of coins and banknotes are changing, the biggest changes are taking place behind the scenes. Governments and banks are developing digital versions of national currencies that can be traded online or sent between users via a mobile application.
But alongside these “central bank digital currencies” (CBDCs) sits a separate class of peer-to-peer currency called cryptocurrency. Bitcoin is the most widely used cryptocurrency in the world, but there are several other types as well.
Bitcoin has become a very popular method of payment across many websites that people use on a daily basis, because of its convenience and low cost. It’s a great option for those who want to make international payments without having to worry about high fees or exchange rates.
Metrics (as of 24th May, 2022)
What is Bitcoin?
Bitcoin is a global digital currency based on distributed computing instead of gold and banks. In other words, Bitcoin is a “cryptocurrency” that’s created, stored, and transferred electronically. While many digital currencies have come and gone, Bitcoin has shown staying power, which has piqued the interest of many traders and investors.
At the time of this writing, Bitcoin is the world’s largest digital currency by market capitalization (market cap), meaning that its total market value is greater than that of any other digital currency. As of May 2019, Bitcoin’s market cap was more than $100 billion. Bitcoin also provides opportunities for diversification, as market research shows Bitcoin has repeatedly displayed a low correlation to other asset classes. In other words, Bitcoin prices don’t generally follow the fluctuations associated with other asset classes such as stocks and bonds.
Bitcoin has offered traders and investors some promising returns, including when its price climbed more than 1,000% in 2017. At the same time, traders must keep in mind that this digital currency is highly volatile and has suffered sharp declines at some points.
What makes Bitcoin unique?
All national currencies, whether they take the form of cash or electronic tokens, have three important qualities:
They are stores of value. You can save them for later use and be reasonably confident that you’ll be able to buy things with them in the future.
They are units of account. They allow people to measure economic value and make calculations based on this value, such as total revenue from sales or profit from an investment.
They are means of payment. Consumers can use them to pay for goods and services, often without paying transaction fees to anyone.
Bitcoin is unique because it was the first digital currency to scale. It was created with the intention of providing a new system of money that does not rely on banks or the government. Some have described this as a “trustless” system, as it does not rely on trusted third parties.
Bitcoin has several unique properties that set it apart from traditional currencies:
- It’s decentralized. The Bitcoin network isn’t controlled by one central authority. Every machine that mines bitcoin and processes transactions makes up a part of the network, and the machines work together. That means that, in theory, one central authority can’t tinker with monetary policy and cause a meltdown — or simply decide to take people’s bitcoins away from them, as the Central European Bank decided to do in Cyprus in early 2013. And if some part of the network goes offline for some reason, the money keeps on flowing.
- It’s easy to set up. Unlike a bank account, you don’t need a lot of paperwork to open a Bitcoin wallet (although there are some exceptions). There are no minimum balance requirements and no monthly fees. You just download software onto your computer or mobile phone (there are several options for both) and start receiving or sending Bitcoins from your digital wallet
- It’s anonymous, at least at first.
Brief history OF Bitcoin Ups and Downs
The timeline below illustrates the sharp gains (and losses) that Bitcoin has experienced over the years: 18th July 2010 – Major BTC exchange MtGox opens US$0.05 31st May 2011 – Foundation of BTC payment service provider BitPay US$8.80 10th June 2011 – Height of the first BTC ‘bubble’ – first legal concerns US$28.92 28th November 2012 – Bitcoin has its first “halving day.” US$12.20 28th March 2013 – BTC market cap surpasses USD 1 billion US$88.92 11th September 2013 – The number of merchants accepting BTC exceeds
1,000 US$121.46 February 2014 – Attack on exchanges lead Mt. Gox to collapse. Bitcoin price craters. February 2021 – Bitcoin hit the $1 Trillion dollars market cap 7th September 2021 – El Salvador adopted Bitcoin as a legal tender
Bitcoin is based on new technology that makes it different from other currencies. This technology is called blockchain, which is a shared record of transactions. If you send someone money through Bitcoin, they will receive it within minutes and no one else can spend it unless they are the owner.