WHAT IS BITCOIN?
Bitcoin is a digital code which has a monetary value because of its limited supply. Where does the code come from? Dedicated computers that work all day long to generate the code. In technical terminology, the code is referred to as keys. Every key is divided into two components: public and private. Public component makes it traceable for everyone but you can’t own Bitcoin unless you’ve the private component as well. A transaction takes place when ownership of both public and private keys changes hands. There will come a time when we won’t be able to generate more keys. Limited supply is what makes Bitcoin valuable. During the last few months Bitcoin and other digital currencies have highly appreciated in value because the amount of code that’s in demand is abnormally higher than the amount of code we currently have and what we’re creating. The process of creating the code or keys is called mining.
BITCOIN FOUNDER
In last months of 2008, someone by the name of Satoshi Nakamoto submitted a whitepaper to a website dedicated for computer programming that elaborated how a true decentralized and unregulated digital currency can be made by sidestepping financial institutions and governments. Nobody knew who Satoshi Nakamoto was and while there are few who have claimed to be the very person, there’s no evidence to date to identify who Satoshi Nakamoto is. Many in the crypto world believe that it’s a pseudonym for a team of developers since the code seems too sophisticated and dynamic to be a work of an individual.
TECHNOLOGY BEHIND BITCOIN
The underlying technology that enables Bitcoin is called blockchain which is basically a real time online ledger stored on a peer-to-peer network instead of one central location. Users can store digital information in this database such as contracts, information related to assets, date, time, ID, financial transactions etc. Each record that’s saved into the database is referred to as “block” and contains a timestamp. Moreover, every block created is encrypted and can be accessed by the person who is in possession of both public and private keys.
A chain is established when owner of a “block” passes his ownership to another user. When a “block” changes hands a new encrypted block is formed with updated timestamp. Every new block is linked to the previous old block so every current owner can see the historical information related to the block he owns. Therefore, the name blockchain.
BITCOIN PRICE HISTORY
Since its inception in 2009, Bitcoin remained in obscurity for years until late 2013 when BTC price closed in on reaching $1,000 only to lose the value again. But that was the spike that put the currency on the map and people started thinking about it seriously as a future alternative to conventional currencies.
The next boom in BTC value came in the second quarter of 2017 when the price doubled in matter of weeks and as mass opinion tried to write it off as an isolated temporary bubble, the last quarter of 2017 arrived which saw unprecedented climb in the Bitcoin price as it touched $19,300 high in mid-December. In subsequent months, the price has come down to hover around in the range of $8,000 – $11,000.
Recently, there has been a push from governments and large technology companies to bring cryptocurrencies under regulation. Just few days back, IMF’s head made remarks about how we should be aiming to bring Bitcoin and other cryptocurrencies under control. Moreover, Facebook and Google have put a ban on cryptocurrency, ICOs and related adverts as United States regulatory authority SEC is hinting toward weaving a regulations net around cryptocurrencies and its operations. This has proved to be detrimental for Bitcoin and other altcoin prices.
HOW TO BUY BITCOIN?
Bitcoin is the de facto cryptocurrency, meaning even if you want to buy other altcoins such as IOTA or XRP, you’ll first have to buy Bitcoin and then you can exchange it for other altcoins at the prevalent rate of the time.
In order to buy Bitcoin, you need to go through these following steps, click here.
Choose Your Digital Cryptocurrency Wallet
Cryptocurrency wallet is basically a secure digital space where you store your purchased Bitcoin. That’s where the code resides. As you would have guessed, the cryptocurrency wallet needs to be trustworthy with stellar reputation, otherwise you can lose your money.
Wallets also differ in terms of offered features and other aspects. So you may choose a wallet that suits your needs. Some of the most reliable and feature rich wallets include Coinbase, Exodus and Mycelium.
Online wallets are fine for low to medium sums but if you find yourself dealing with large amounts in terms of BTC USD value, ensure you store it in an offline cold storage to maximize security.
Pick a Bitcoin Exchange
The best way to buy Bitcoin without the involvement of a broker is through a cryptocurrency exchange. You will find numerous exchanges on the web but very few offer high quality trustworthy performance. Another factor you should look at is the amount of fee charged for buying Bitcoin and the available payment methods.
If you are a beginner or aren’t sure where you start from, Coinbase is the right choice for you. It has been in service for years and offers great customer support for a reasonable fee. Coinbase app is available both on desktop and mobile. Apart from that you also have Bitfinex, Kraken and Bitstamp with high credibility. Another way is to search for Bitcoin exchange on the Bitcoin website itself as it will tell you which exchanges operate in your region.
Select Payment Method & Buy Bitcoin
Because of the high chances of scamming, many Bitcoin exchanges limit their payment methods to ensure secure transactions. Usually bank account and credit card money transfer is accepted with a few limitations. Wire transfers, especially of big amounts, could be a hit or a miss as they tend to attract regulatory authorities and financial institutions for money laundering investigation.
Once you’ve chosen your mode of payment, you simply purchase the Bitcoin as you’d purchase any other product from the internet. After buying store them on your wallet and follow the instructions closely to ensure your crypto wealth is safe.
IOTA VS BITCOIN VS ETHEREUM
|
Cryptocurrency |
IOTA |
Bitcoin |
Ethereum |
|
Market Cap |
$4 billion |
$158 billion |
$69 billion |
|
Avg. Growth Rate |
400% |
950% |
1600% |
|
Predicted Price (2020) |
$8 |
$90,250 |
$12,800 |
|
Total Supply |
2,779,530,283 MIOTA |
16,916,563 BTC |
98,158,443 ETH |
|
Website |
www.iota.org |
www.bitcoin.com |
www.ethereum.org |
Up to date 18/03/2018
HOW TO USE BITCOIN - APPLICATIONS OF BITCOIN
Alternative To Legal Tender – One of the major aspects that distinguishes Bitcoin is that it can stand as a currency in competition with country’s legal tender. It’s not affected by politics and inflation so it provides a great alternative to current solutions.
Decentralization – This has two benefits. The first is no single corporation including government and no single individual gets to dictate terms. It’s completely unregulated. Secondly, it’s securer in terms of the fact that it’s difficult to steal it and that it allows for anonymous transactions.
Benefit To Financial Institutions – Once Bitcoin and other cryptocurrencies come out of the volatility phase, it’ll open up countless opportunities for banks and other financial institutions to model their transactions based on blockchain technology saving billions of dollars in maintenance and security.
Global Remittances – Sending remittances, especially to developing countries, can be a nightmarish process as the industry is loaded with money laundering practices and transparent solutions often bear a high cost. That’s where Bitcoin and other cryptocurrencies can play a major role where we would be able to transfer wealth globally with greater transparency and security.
BITCOIN FRAUD HISTORY
Being the oldest cryptocurrency on the block, Bitcoin has been prone to scams and has always attracted hackers and other malicious and criminal elements. Current boom in the cryptocurrency’s price has increased that risk manifold. Here’s a bit of history of the attacks and scams.
FEBRUARY 2014 – MT. GOX COLLAPSE: Headquartered in Japan, Mt. Gox was the biggest cryptocurrency exchange of the time and was responsible for almost half of the global transactions. In February 2014, a hacker stole 850,000 Bitcoin sending company into bankruptcy. The stolen amount was then worth $450 million and would have been equivalent of $8.5 billion today.
JANUARY 2015 – BITSTAMP HACKED: Bitstamp, another popular exchange, became a victim of a hack where hackers managed to steal 19,000 Bitcoin worth $5 million. Fortunately, Bitstamp was big enough to survive the hacking attack.
AUGUST 2016 – BITFINEX HACKED: In another hacking attempt, Bitfinex lost around $77 million worth of Bitcoin. The company still struggles with gaining traders’ trust.
AUGUST 2012 – BITCOIN SAVINGS & TRUST PONZI SCHEME: This was a classic Ponzi scheme where perpetrators lured customers into buying Bitcoin promising high returns and the old customers were paid profits from the investments of new ones. The scam was shut down in August 2012 after causing $40 million in monetary damages.
AUGUST 2011 – MYBITCOINS VANISHES FROM THE WEB: MyBitcoins was a wallet service that offered traders the facility to store Bitcoin on their behalf. It was popular in early 2011 but completely disappeared from the internet in August of the same year. They tried to spin it as a hack but later it was found out to be another scam.
There is a long history of scams and hacking attempts in Bitcoin space and it’s impossible to cover all of them. What should be kept in mind, however, is that one should exercise immense caution and step into this prone to hacks and scams space with due diligence and thorough research.
REDDIT ON BITCOIN
Reddit community is always on forefront of technology and Bitcoin isn’t an exception. With more than 750,000 readers and around 12,000 avid users, Bitcoin is known as the currency of the Internet on Reddit.
The overall sentiment of Reddit on Bitcoin remains quite positive as new feature by the name of Lightning has been introduced to improve transaction processing time on the blockchain. One of the users reported that his transactions are now being processed under an hour.
One thing should be noted that as compared to other altcoin communities, Bitcoin Reddit community is far too mature and doesn’t panic in the event of price drops such as the most recent one. Whereas other communities start questioning the future prospects of the currency they’ve invested in.
FUTURE OF BITCOIN
Regardless of the ups and downs in the price, the platform behind the currency has gained strength but it has also seen stiff competition from better alternative technologies like Ethereum and IOTA that solve the shortcomings of Bitcoin. While Bitcoin is maturing, it’s high transaction times and volatility doesn’t make it a good choice to be an alternative currency. The introduction of lightning may change that in the coming months but how is it going to compete with IOTA on the front that gains speed as number of users increase is still a question mark.
There is a possibility that Bitcoin will concede ground to better technologies like Tangle and Ethereum blockchain but it would be naïve to write it off today. Bitcoin has always had a knack of surprising its critics with strong comeback and over the years it has only appreciated in value. How it will tackle the challenge of newly introduced cryptocurrencies? It remains to be seen.
CONCLUSION
Given the recent push from governments and technology corporations to regulate cryptocurrency, Bitcoin’s value has plummeted by more than 20% in last few days, however, it’s not the first time that Bitcoin has faced adversity. It’s proven to be a mature and resilient currency that bounced back after 2013 downfall, survived Mt. Gox debacle and lived through constant hacking attempts. It does remain investable but the fact is, it’s already close to demand and supply equilibrium. That means, even if you invest you are unlikely to see high end returns on Bitcoin. That’s why you are better off investing in currencies like IOTA where you won’t need a lot of money to get in and future returns could be really high.
Whatever transpires, one thing is for sure – Bitcoin is here to stay. However, will other cryptocurrencies push it into the realms of irrelevance? It’s too early to say.
