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What’s behind the Bitcoin hype?

by Sita Dahal 3 months ago in bitcoin

Demand Behind Bitcoin in the world

What’s behind the Bitcoin hype?
Photo by Bermix Studio on Unsplash

Let's talk about Bitcoin. It is the world's most popular digital currency. Bitcoin has made some people really rich, really fast. And some big companies are buying. But many big names will not come close to it. So can Bitcoin be trusted? How does this work? And what is Bitcoin really important? There are thousands of cryptocurrencies out there but most of the people they talk about are Bitcoin. It is a digital currency but instead of dollars and cents, it is Bitcoins and satoshi and one Bitcoin worth 100 million satoshis. But unlike the dollar, the euro, or the yen this currency is not controlled by the government. That’s what makes Bitcoin change. And for some people - it's a little scary.

In the past it was easy. Countries will deposit their gold coins pressed into their central bank. But the money is now a paper, instrument, or number in your bank account and its value is guaranteed by the government. That is why we hope. We also hope the banking system will deliver our money - especially online. So when person A sends $ 100 to person B the banks confirm that the money has been transferred from one account to another. And banks are renewing their savings accounts. And of course, banks charge a fee for all such services. So what if there was a way to cut the banks? Well, that was the original thinking behind Bitcoin. This idea was posted online in 2008, outlining the kind of peer money you can send from one party to another without going to a financial institution. Its creator, or creators, used the name, Satoshi Nakamoto.

It was a day of awakening revealing the dangerous ways of banking. Many people lose everything, including their faith in the financial system. Coincidentally or not, Bitcoin emerged simultaneously and 10 years later it still continues. Therefore, Bitcoin is not regulated by the government. It is not a bank or a company. Instead, it is open-source software that works for them - or more accurately, it is owned by many people. Here's how. So for the first time, it is called a cryptocurrency because Bitcoin uses encryption to keep it secure. And instead of bank accounts, people who sell Bitcoin have two keys. Private and one is public. They are not real keys but pieces of encrypted code that fit together. If person A needs to get Bitcoin from person B they send it to the B public key. Think of it as a number on an ATM card. Person A uses her private key to encrypt transactions and person B uses her private key to encrypt and access their Bitcoin. Those secret keys are like a PIN on an ATM card.

Now instead of a bank guaranteeing that transaction is done through a large computer network around the world. And they all have the same copies of the Bitcoin book. It is a record of everything that is done that is constantly being updated. So if there is any kind of fraud the whole network knows about it. That book used is called a blockchain. Bitcoin transactions are integrated into blocks and connected together. And each block contains a small code from the previous one, creating a timeline that is expected to never conflict. So who are these witnesses? Yes, they are real people called miners with powerful computers.

Miners often did this alone. Some still do. But Bitcoin has grown. And now it takes a lot more computer power and more power. So miners often congregate in so-called lakes. Some of them built large warehouses of servers called farms. The main ones are in China, Russia but also places like Iceland where it is easy to just cool those servers. There is also a great deal of power involved. A Cambridge University study says that the global Bitcoin network uses more electricity than Argentina. But what about all those miners? Keep in mind that Bitcoin is not a company so miners don’t get the extra income in the blockchain. Instead, the system rewards them in Bitcoin. So, the transaction is actually circulating in the Bitcoin network - like in a waiting room ready for verification.

Miners are looking for new transactions to put together in blocks. But before they can add a block to the chain there is an extra safety check that is not quite common. Mining computers must compete to solve the coding puzzle. When a miner solves that puzzle first the block and everything inside is added to the blockchain and that miner is rewarded with a certain Bitcoin. Another complaint among crypto fans is the idea that Bitcoin is seen as a hedge against inflation. Some currencies suffer when, for example, large amounts of money are printed, the pool is polluted, and its value is reduced. Bitcoin revolves around the problem of inflation by depositing its offer into 21 million Bitcoins. Currently, about 17 million Bitcoins have already been distributed but there are a few million lost because some people have lost their private keys. So how does the rest of Bitcoin keep its value? Yes, the system reduces the downside.

One way is to cut mining earnings by half every four years. In 2009 the reward was 50 Bitcoins for all transaction blocks added to the blockchain. Four years later it was 25 and so on. In other words, it is the basic and demanded provision. Bitcoin supply is hidden while it needs to grow. For now at least. So many people come up with the idea that Bitcoin can compete with gold - in the end. But so far the value of Bitcoin compared to other currencies has been far from stable. We went up and down like crazy.

One of the great things that PayPal said would allow users to buy, hold and sell Bitcoin. Others followed, including Tesla, the owner of Elon Musk, who said he would also start accepting Bitcoin as payment. But is that the case? Not everyone receives it or believes in it. Yes, companies like Microsoft, PayPal, and Mastercard accept Bitcoin. You can use Bitcoin to buy gift cards from Nike or Starbucks. But its use is limited. And while crypto lovers think the value of Bitcoin will go up sharply - perhaps to the point where a single Bitcoin costs a few hundred thousand dollars - some say it's just a bubble. There are other concerns about Bitcoin as well.

If something goes wrong - you forget or lose your private key for example - there is no customer service you can call. Another issue is that Bitcoin has been misused. Criminals love it because it is unknown. So the regulators are already looking at it. In the big deal Bitcoin is still a good new concept. Some people are willing to take big risks to pursue potential income. Some think that there is no way a piece of code costs tens of thousands of dollars. It boils down to trust. As with any Bitcoin currency that will work, enough people should buy it from it. There’s obviously a lot more to Bitcoin and cryptocurrencies, a lot of things we didn’t have time to get into.

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Sita Dahal

Hello, I am Sita Dahal, I am an artist and love roaming around the globe.

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