Life Science & Technology

Bitcoin: A New Type of Currency

Our usage of technology has become increasingly popular and what we value as money is changing. Bitcoin is a growing cryptocurrency with increasing usage today.

Bitcoin: A cryptocurrency that has grown exponentially since its introduction in 2008. What is a bitcoin and how does one obtain one?

Bitcoin is a type of online currency, or a “Peer-to-Peer Electronic Cash System“ as called by its creator, Satoshi Nakamoto, in 2008. Bitcoin can be used for a variety of purchases, such as food and online shopping. Today, more and more businesses are accepting them. However, this fast-growing, revolutionary currency is not your ordinary online currency. It has a number of benefits that has attracted a large consumer base and investors.

The main difference between bitcoin and other currencies is that bitcoin is open source–it is not owned by a central government and anyone can obtain and and use it. Bitcoin is instead circulated and obtained through mining, which involves the processing of computing power to solve complex problems and users are rewarded for solving these problems with bitcoin. Miners usually work together in a pool, where they combine their computing powers to break open a single block and are rewarded based on their contributions. Mining in pools is much more effective than individual mining because each successive bitcoin is progressively harder to mine and requires more computing process. This means that the computing power required to mine a single bitcoin a few years ago required a single machine whereas today, multiple computers and miners are required to mine a single bitcoin. Mining relies on a computer’s graphics card to solve these algorithms. People discovered that powerful graphics cards designed for gaming worked extremely well for this. Realizing this, a market has been created for incredibly fast and powerful graphics cards and machines specifically designed for mining. Many have dedicated entire rooms full of miners to mining. However, bitcoin mining has also been notorious for high energy consumption. This mean that one would only truly profit from mining bitcoin if their bitcoin profit is able to pay for the excess power used in the process.

Alternatively, one can exchange other currency for bitcoin online through websites such as Changelly. Bitcoin is not tangible; it is not like other currency where you are able to obtain a physical copy. Therefore, bitcoin can be and is often divided into smaller fractions during transactions called satoshi, named after Satoshi Nakamato, a pseudonym for the creator of bitcoin. (The creator’s true identity is still unknown.). A satoshi represents one hundred millionth of a bitcoin and is useful in making smaller transactions in bitcoin, especially if one doesn’t want to send a single bitcoin worth thousands of dollars.

So how are transactions made in bitcoin? They are made through bitcoin wallets that contain address numbers. These address numbers are simply a string of letters and numbers that identify your wallet and you as a bitcoin user. However, bitcoin wallets have received criticism because of the fact that they are public and everyone can see your transactions as well as how many bitcoins you have. Your private key however, like the name suggests, is private and allows you to spend your bitcoin. These private keys are typically more than a hundred digits long. You are able to send bitcoins to others when you are given their address number. Because bitcoins are not tangible, when one loses their wallet, the bitcoins in that wallet are lost forever. Since the start of the project, it was said that there will only be a total of 21 million bitcoins in existence. As of December 14, 2017, there are a total of 16.7 million bitcoins in circulation which is 79.5% of all bitcoins that will ever exist. However, one should also consider the how each each bitcoin becomes progressively hard to mine.

The growth of bitcoin is no laughing matter either. Take for example, Kristoffer Koch, a Norwegian student who was an early investor in bitcoin. In 2009, Koch bought about 5000 bitcoins at less than a cent each for a mere total of about $27 USD. Koch forgot about this purchase until Bitcoin rose to popularity and value four years later in 2013. Bitcoin at the time was then worth well over $100 USD. Koch was able to access his encrypted bitcoin wallet and the $886,000 ready to be cashed out. Koch was one of the few individuals who had recognized the potential of bitcoin and invested in it during its early developing years. Bitcoin has had a large net growth since its start, satisfying patient long-term investors. At the time of this article, bitcoin is fluctuating around $11000 USD.

However, there are some negatives to bitcoin. One of them is its volatility. Bitcoin is infamous for its unpredictable falls and rises. The value of bitcoin fluctuates from day to day; for instance, today you may have $50 in bitcoin but tomorrow you may only have $45. Bitcoin is a bubble economy. A bubble economy is built and supported by its consumer growth. By buying bitcoin, you are essentially betting on its value in the future. Although bitcoin is slowly gaining users, many are doubting bitcoin’s success as a rising major currency in today’s world.

Bitcoin has created an entirely new market for cryptocurrency. Examples of this are Litecoin and Ethereum as well as countless others. They operate on the same principle as Bitcoin: mine, sell and trade. Because bitcoin is getting increasingly harder to mine, many have began looking at other cryptocurrency that are replicating what Bitcoin is doing. Although these smaller cryptocurrencies are easier to mine, they have not experienced the great growth Bitcoin exhibited. This is due to the sheer number of cryptocurrencies. The reason Bitcoin was able to grow as well as it did is because it was such a new concept for its time and had no competition. This cannot be said for cryptocurrency today where Bitcoin dominates hundreds of cryptocurrencies.

Bitcoin is great. I can definitely see it as a major currency in the foreseeable future. It demonstrates the innovative power of today’s technology in both convenience and security. I look forward to Bitcoin becoming an accepted currency in the future.

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