The cryptocurrency market is already ruling the financial ecosystem with many new investors jumping into the sphere every day. In such a clustered circumstance, bitcoin still emerges as the top digital currency. In 2021, financial experts had a vision that bitcoin trading will only gear up its race in the future. However, bitcoin broke its predictions and rallied at a record US$63,00 in mid-April 2021, infusing an array of hope among crypto investors.
Though the history of blockchain networks and the digital currency concept is traced back to many decades, it was effectively implemented in the real-world scenario through bitcoin. Since Bitcoin trading hit the mainstream, many other cryptocurrencies have sprung up and are making rounds in the digital currency market. Today, the cryptocurrency sphere features more than ten thousand digital tokens. Yet, the popularity of bitcoin hasn’t gone down and the adoption has dramatically increased in the past few years. With its increasing popularity, bitcoin users predict that by 2024, almost 94% of different types of bitcoin will be released. However, many crypto enthusiasts argue that bitcoin is still in its early stage and has a long way to go before it completely matures. That being said, Analytics Insight has compiled the info on everything you need to know about bitcoin.
What is Bitcoin and How Does It Work?
Bitcoin is a famous cryptocurrency that works as a medium of exchange online. The currency stole mainstream investors in 2017 when it rose to fame over its sudden surge in price. Recently, throughout 2020 and so far in 2021, bitcoin has been undergoing massive volatility. Debuted in 2009 after mysterious creation and launch, the digital currency functions on a decentralized computer network or distributed ledger called a blockchain.
The distributed digital ledger acts as an open-source public record. Anybody who has access to the distributed ledger can see the transactions and once a transaction is added to the ledger, it can’t be changed or revised. The decentralized nature of bitcoin is something that is often hailed to be the major accelerator of cryptocurrency adoption. Users can buy, sell, or trade over the internet without the government’s or bank’s intervention. Besides, bitcoin functions anonymously. Even if you get to trace a bitcoin’s movement, there is no assurance over finding its owner.
Users need a ‘digital wallet’ to store their bitcoin assets. The digital asset can be accessed through smartphones or computers. People get bitcoin in three ways. One is they buy it for real money, second is they sell something and get bitcoin in return, and the final one is creating a bitcoin and getting bitcoin commission for that.
Certain cliches are clouding the bitcoin sphere. Many think that only tech-savvy people can get the maximum benefit from bitcoin investment. It is completely wrong. Anybody who wants to make a profitable investment can try bitcoin and it has nothing to do with being technical. You can just start your first bitcoin purchase by downloading a bitcoin wallet on your computer or smartphone. It will generate a bitcoin address that can be used to purchase bitcoin.
Bitcoin Mining Process
We can only get bitcoin tokens by mining them. Bitcoin mining is becoming increasingly famous among the Millenials. Mining is a distributed consensus system that is used to confirm pending transactions by including them in the blockchain. The internal mechanism allows multiple computers to agree on the state of the system wherever a new block is added. People who are well-versed in algorithms and mathematics find it easy to crack complex mining problems. Every time somebody invests in bitcoin, a miner needs to add it to the block. These rules prevent previous blocks from being modified because doing so would invalidate all the subsequent blocks.
To maintain the value of bitcoin and bitcoin miners, the bitcoin community has engaged in a process called bitcoin halving. The cryptocurrency network introduces new bitcoins into the market through bitcoin mining. Every ten minutes, a bitcoin miner engages in solving the algorithm and adds the block to the network. But bitcoin mining has drastically surged over the years. Therefore, to keep a tab on the miners’ income and maintain bitcoin’s value, the reward given to bitcoin miners is reduced to half roughly every four years. Every time 210,000 blocks are mined, the bitcoin reward gets divided in half. When bitcoin was first launched in 2009, miners used to earn 50 BTC rewards for cracking the problems. After the first halving, the reward got reduced to 25. Currently, bitcoin miners get 6.25 BTC per block they add. Predictions suggest that by 2040, the reward will become completely zero and miners will be forced to earn through commissions.
The Origin of Bitcoin
Bitcoin became extremely popular following its launch, purely for its underlying blockchain network and decentralized nature. Satoshi Nakomoto, an unidentified person is believed to be the developer of the blockchain technology that eventually opened the door for the first successful cryptocurrency, bitcoin. According to the initial claims, Satoshi saw some issues with the existing financial infrastructure and payment systems and created bitcoin to address them.
In 2008, the year when Bitcoin White Paper was published, the people and government were undergoing a financial crisis. In order to ease the burden on the general public, governments from across the globe started printing more fiat currencies. Although the ide brought liquidity and slashed interest rates to near zero, it cause long-term fluctuations in fiat currencies. In order to bail out banks from the crisis, the government used ‘more printing of money as a tactic. But somehow, the idea backfired at them as it added more debt to the future taxpayer liabilities.
When the world was experiencing back-to-back financial hits, Satoshi Nakamoto realized that it is the right time to unleash the idea of the decentralized financial system that makes investors the decision-maker. The open-sourced blockchain technology that powers the economic circle allows everybody to see the transaction data and more importantly, denies the routine that money should be monitored.
Originally written under the pseudonym Satoshi Nakamoto, the Bitcoin whitepaper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ was unveiled in 2008. The nine-page content explained the functionalities of the blockchain network and instigated many to wonder if this could be the future of financial offerings. Especially, the peer-to-peer network is fully decentralized and facilitates payments over the internet without any financial institutions. Satoshi worked on blockchain technology and launched the first cryptocurrency called ‘Bitcoin’ in 2009. Later, Satoshi handed over the concept to the cryptocurrency community that used blockchain to its fullest.
Satoshi Nakamoto, the Untold Story
Nothing interests people more than an anonymous hero with a secret identity. Bitcoin’s founder Satoshi Nakamoto is one such person or a group of people who have concealed their appearance from the public. Satoshi is called the father of Bitcoin for his greatest contribution to the decentralized financial network. He appeared out of nowhere, introduced a whole new concept to the world, and bid a goodbye to the financial market once he was ensured that his project was in good hands.
Currently, Bitcoin is valued at over US$1 trillion. Although bitcoin is functioning well even without Satoshi’s guidance, he is reported to be the owner of over 1 million bitcoin which could be roughly valued at US$50 billion, equal to 5% of total bitcoins in usage so far. Satoshi unveiled the concept with the hope that it could introduce a seamless financial sphere over government regulations and inflation. He wanted to wrestle control of cryptocurrency from financial elites and putting it in the hands of the common man. The first bitcoin transaction took place when Satoshi sent 10 bitcoins to Hal Finney, a well-known developer who had downloaded the Bitcoin software on its release date. After that successful attempt, the first commercial transaction came to effect in 2010.
After Satoshi’s disappearance, the world, especially, the media was seeking people who could be him. Over the years, it was found that Satoshi could potentially be a Japanese because of his name. But people were pretty sure that he doesn’t live in Japan. His writing style and English were similar to that of people from western countries. Therefore, many started looking for people who are from Japan, has potential knowledge in cryptocurrency and blockchain network, and lives in a western country. Some theories even suggest Satoshi to be a group of people working together to unravel blockchain as it is very hard to build something as astonishing as this all by oneself. These are the people who the world believes could be Satoshi Nakamoto.
- Dorian Nakamoto- Dorian Nakamoto is the most possible candidate who ticks all the boxes of the expected bitcoin founder. In March 2014, Newsweek identified Dorian Nakamoto as the currency’s creator. In an article published in the crypto community, the media connected many lines between Dorian and Satoshi.
- Nick Szabo- Although Nick Szabo doesn’t fit in the geographical theory created for bitcoin’s founder, he has mentioned smart contracts way back in 1996. Besides, in 2008, he conceptualized a decentralized currency called Bit Gold, which had many similarities with Bitcoin.
- Hal Finney- As the first person to reply to Satoshi’s mail, Hal Finney epitomizes bitcoin more than any other known person. Hal identified the long-term potential of bitcoin and invested heavily in it. Besides, his writing style has the closest resemblance with that of Satoshi.
Using Bitcoin in a profitable Way
Bitcoin is not just a single-hand investment that gains profit through a one-time investment. Bitcoin investors have a variety of options to increase their bitcoin assets. But before doing so, you need to clearly understand what needs to be done. We have listed a few profitable ways to make your bitcoin journey easy.
- Micro earning is very famous among crypto investors. By taking up micro bitcoin jobs, you will be asked to engage in simple processes like sharing a message, reviewing a new feature, or exploring new fronts. The platform will give you a minimal bitcoin bonus as a reward for the micro job.
- Similar to money lending, bitcoin can also be lent to others for interest. Individuals render bitcoins on lease to other folks instead of holding them in their digital wallets. There are a handful of lending platforms that are doing well in the market.
- Mining is one of the best ways to earn bitcoin tokens. If you are tech-savvy and interested in solving cryptographic puzzles, then bitcoin mining is the best option for you. There are two types of bitcoin mining namely personal mining and cloud mining.
- One of the most disruptive ways of using bitcoin is to accept it as payment. El Salvador has recently recognized bitcoin as a legal tenure, making business organizations accept bitcoin payments. Paytm has also come forward to provide space for bitcoin trading. Following this, many small to large businesses are gearing up their bitcoin game by accepting bitcoin payments.
- Bitcoin dividends work more or less like stock dividends. All you have to do is buy and hold bitcoin for a period you wish to earn interest. You will gain a fixed interest for the period of holding.
Disadvantages of Bitcoin
Despite its popularity, bitcoin suffers from significant setbacks in the cryptocurrency market. They are mostly based on their network functionalities, limit, and severe volatility. Some of the disadvantages of bitcoin are listed as follows.
The Energy Consumption is High: China, the largest bitcoin miner in the world has recently banned its people from continuing the mining process. The country’s initiative came after it realized that bitcoin mining is eating up the electric energy in China. Miners generally need big mining computers and a lot of electricity to mone bitcoin. It also poses a global threat to climate change as extreme usage of electricity pollutes the environment.
No One is Backing It: Fiat currencies are backed by a central government to control their volatility. On the other hand, stablecoins are pegged to countries’ national currency to maintain a moderate value. Unlike both, bitcoin is valued based on its market capitalization and adoption. Since there is no guarantee, people find bitcoin less confident compared to fiat currencies. Besides, bitcoin’s volatility is no joke. Its value has both skyrocketed and tumbled dramatically within few days.
Comes with a Limit: Since blockchain is not controlled by a central authority, there is nobody to accelerate its price when bitcoin is facing a downward trend. As the number of coins is also limited, it poses a serious threat to bitcoin as a currency. Whenever bitcoin is facing a destructive deflationary spiral, it has to revive itself.