If you haven’t heard about the bitcoin boom which is all that anybody talks about nowadays, you’ve probably been living under a rock. This digital currency has been around for seven years but its value skyrocketed in last quarter of 2017 taking over the stock market by storm.
The market is flooded with bitcoin enthusiasts and traders looking to make profit on bitcoin futures, driving up the prices to over $16,000 – while others are trying to wraps their heads around the concept of this new digital currency phenomenon. What is bitcoin? Where did it come from? And most importantly, does it have a future? Here’s everything you need to know about this cryptocurrency.
A Single Bitcoin Worth Thousands of Dollars Today
Seven years ago, when the concept of mining virtual currency was born, a single bitcoin was only worth a few cents. Programmers and IT workers began mining hundreds of these useless bitcoins as a hobby, not knowing that one day they would be worth millions of dollars.
One person even reported throwing away his hard drive containing 7,500 bitcoins years ago because he didn’t think the virtual money would be worth anything – his one small mistake cost him $69 million today.
What is Blockchain?
There are several cryptocurrencies on the market including Ethereum and LiteCoin but Bitcoin is the most successful one out of them. At the heart of all these digital currencies is the concept of creating decentralized network that facilitates peer-to-peer transactions without any intermediation from a bank.
All cryptocurrencies use blockchain as the underlying technology which acts as public ledger to keep a record of all the transactions made. Blockchain provides the solution to the biggest problem digital currencies had before – the risk of double spending. Since digital currency is merely a piece of code, there had always been a threat of hackers stealing the code and using it on multiple platforms.
Blockchain stops that from happening and ensures a secure transaction through complex algorithm and a series of computations at the currency’s network.
The entire blockchain technology and bitcoin was created in 2009 by an unidentified person or a group that went by the name of Satoshi Nakamoto. Several people have tried to uncover the mysterious identity of bitcoin’s creator but he suddenly disappeared from the internet in 2010 after handing over his masterpiece to Gavin Andresen, who is Bitcoin Foundation’s current chief scientist.
Several people have tried to take advantage of Satoshi’s unknown identity and put out claims that they are the real creators of bitcoin, but no definitive proof of his identity has been discovered yet.
How are Bitcoins Mined?
Bitcoins can be bought with fiat money through various online exchange centers or they can be created through the process of mining. Remember how the Blockchain secures online bitcoin transactions by performing complex computations? Well, this computation is actually done by other users through the mining process. Users allow their computers to perform complex calculations for the blockchain and in return they are rewarded with bitcoins.
The currency’s network bundles up the most recent transactions into one ‘block’ and other users must provide calculations to solve the complex equations of the block and find a valid hash key in order to earn the reward. The process of mining can be quite time consuming and requires a powerful computer to perform the complex computations. In blockchain’s early days, miners were able to find valid hash keys and mine quite a lot of bitcoins using their normal computers but as the blockchain grew bigger and more complex, so did its calculations.
Ever since the invention of specialized mining computers, earning bitcoins has become next to impossible and the cost of electricity used to run these machines 24/7 can exceed the value of the coins mined. And since there are only 21 million bitcoins in existence, the process of mining will soon come to an end once all of coins have been earned.
Is Bitcoin Safe?
Once you buy or mine a bitcoin, your computer stores your electronic money in a digital wallet which is secured by a secret password that grands the owner access of their money. Despite the risk of the password getting in the wrong hands, bitcoin has, surprisingly, never been hacked.
However, other exchange websites that deal with buying and selling of bitcoins have been hacked several times and since most of these websites let users store their bitcoins on their platform, there is a risk of your money getting stolen over the internet.