Bitcoin is a digital currency and one of the first notable cryptocurrencies, designed as an alternative to fiat currencies. Since this coin is virtual, records are kept as balances on a public ledger known as Blockchain. The balances are kept using two sets of keys one private and another public. These keys are sequences of numbers and letters that are encoded using mathematical algorithms. They work much like bank accounts and verification pins. The public key functions as an address to which Bitcoin can be sent. The private key, on the other hand, is like a pin that is used to verify the user’s authenticity – this key should be kept private for security purposes.
Bitcoin may have assumed the symbol of cryptocurrencies in general but it is not the first cryptocurrency. In fact, the idea behind cryptocurrencies dates several decades ago, but Bitcoin itself was launched in 2009 by an anonymous person (or likely a group of people) going by the name Satoshi Nakamoto. The cryptocurrency was first proposed in a whitepaper published in 2008. However, it is not until 2013 that Bitcoin gained considerable exposure and popularity.
The very first Bitcoin came into circulation when the first block, block 0, was created through mining. Mining is the most lucrative way of getting this cryptocurrency, but it is not the simplest. It involves creating blocks by working out complicated mathematical problems required to create additional blocks. Several coins are released to miners who successfully create blocks.
The number of coins released was designed to halve after every four years. Eventually, the supply cap of 21 million coins will be reached and mining will come to an end. There are several other ways of getting the coins, including getting them as a payment for work and buying coins on crypto exchange platforms.
Bitcoin was designed to offer an alternative to fiat currencies. This way, it can be used much like any other major currency such as the U.S. dollar, for instance. In fact, more and more businesses are accepting Bitcoin as a means of payment – there are even Bitcoin ATMs in several major cities. However, Bitcoin is primarily used as an investment asset thanks to its volatility and soaring prices.
From the creation of its first block, Bitcoin promised to overcome the banks’ weaknesses and offer the following advantages:
- Security: All funds are stored securely on a cryptography system, and users can only access the funds if they have a private key. At the same time, hacking is almost impossible, because the Bitcoin Blockchain platform is operated on thousands of computer nodes.
- Transparency and Privacy: The Bitcoin Blockchain platform is public and all transactions can be reviewed at will. At the same time, users’ identities are masked and only their public keys are visible
- Speed and Coverage: The crypto coin transactions are faster than those of banks, can occur between parties in different parts of the world and can contain thousands of dollars.
Bitcoin started off trading at $0.008 per coin back in 2009. Prices remained relatively stable (and low) for some time and Bitcoin went largely unnoticed by most people. Its big breakthrough came in 2013 when it started off the year at about USD 13.50. That year was particularly volatile for Bitcoin as prices rose well above USD 1’000 and fell below this mark by the year’s end. 2014 and 2015 were just as volatile and prices remained largely unstable.
2016 was the turning point for Bitcoin as well as most other major cryptocurrencies back then. Bitcoin traded at about $430 at the beginning of the year and rose to about USD 770 by the end of the year. This rise in prices and stability was attributed to an increase in demand for Bitcoin from the Chinese market.
This increase in demand was felt in 2017 when the famous cryptocurrency was traded at over $19,000 by the end of the year. However, 2017 was also the most volatile year for Bitcoin, and the surge in prices slowed down the next year. In February 2018 the prices dropped to about USD 10’000 and settled at about USD 6’000 in June. However, the bear market is still in control, seeing that in November 2018 there was a further dip in its prices to about $4,500.