Bitcoin: The new currency or just a trend?
This year Bitcoin went from being a niche currency to a functional economic system that everyone wants in on. Its price went from $1000 at the beginning of the year to almost $16 000 (December 23, 2017). So, how did all of this start? And how did it become so big?
Bitcoin started in 2008 following the economic crisis that led people to mistrust current banking and monetary systems. On August 2008 the domain name bitcoin.org was registered. And on October of the same year, an unknown person under the now-famous alias Satoshi Nakamoto released a paper titled A Peer-to-Peer Electronic Cash System to a cryptography mailing list. And in January 2009 the first open-source Bitcoin client was released and the Bitcoin network came into existence. But what is it really?
It is a type of currency that is neither printed nor owned by a single entity. It is a decentralized currency so no one really owns the Bitcoin network. And every transaction is recorded in the, publicly available, Bitcoin Core. It’s a blockchain containing all the Bitcoin transactions in history with a size of, currently, about 145G Bytes. As quoted from bitcoin.org: “There’s no voting or other corruptible process involved: there’s just individual software following identical rules—math—to evaluate identical blocks and coming to identical conclusions about which block chain is valid “
This currency can be acquired by anyone having the required hardware. You can use your own computer to do what is known as mining and get your very own Bitcoins. Although it would be very slow even with a high-end PC, there are dedicated miners that are starting to hit the market and gaining popularity with the rise of Bitcoin. However, some experts speculate the more people mine the faster we deplete the 21 million Bitcoins available which will hinder its progress unless something is done to change that.
Although the process is called mining, it is actually compensation for helping keep the Bitcoin network secure: To secure the transactions and prevent anyone from changing the records, a hash algorithm is used. Every transaction is hashed but before it is recorded in the blockchain, the hash must start with a certain number of 0’s depending on the network’s hash speed. So “miners” must add random numbers to the end of the transaction to obtain a valid hash which is then stored in the Bitcoin Core. After finding a valid hash, you are compensated by newly minted bitcoins.
But 2017 is the year Bitcoin really become almost omnipresent on the Internet. This is because many countries are starting to accept it: Japan legalized it earlier this year along with many local retailers and businesses. Other countries are also starting to accept it along with many investors taking interest. So with everyone getting into cryptocurrency in general and especially Bitcoin, demand is getting higher and higher which will lead into even more price increases in the future.
Now, whether cryptocurrency is the future of money is still left to be seen. Since it is practically anonymous and untraceable, it can help customers feel more secure. However, it is used heavily in illegal activities and especially ransomware. It is also used in the deep web to trade in firearms and drugs among many other things. So while we are all excited for this new type of currency we should take a step back and think about what it could all mean if it really became a universal currency