The cryptocurrency revolution lived only in the imagination of a few less than a decade ago, but today its adoption is spreading daily hand in hand with Bitcoin, the first and most popular of these assets. Here we tell you everything you need to know about the most popular cryptocurrency.
What is Bitcoin?
Bitcoin is a digital asset whose appreciation capacity has exceeded in recent years that of the most traditional risk investments: stocks. With a current price of $ 47,500 per unit, it outlines an increase of more than 60% for the year. But owning the asset involves high risk.
Any description of Bitcoin should mention that the most typical characteristic of this cryptocurrency, above its ability to revalue, is the volatile and abrupt way in which its market changes its mind. From a record $ 68,925, it lost 31% in less than two months.
That contrasts, for example, with Wall Street’s S&P 500 index, which has risen an average of 12% per year over its long existence. The main question for analysts is whether the pronounced movements of Bitcoin are justified. Its enthusiasts think that it is so, while its detractors accuse mere speculation.
Bitcoin currently has a market capitalization of nearly $ 886 billion, close to that of large listed companies like Tesla Inc and Meta Platforms (formerly Facebook). Increasing support from the traditional economy has made its rapid and progressive advance possible.
How was Bitcoin created?
To understand Bitcoin it is necessary to go back to the project that conceived it. Satoshi Nakamoto, pseudonym of the creator or group of creators still unknown, submitted his proposal in emails to crypto experts in 2008. He sought to create the Internet currency, a secure and independent one.
Bitcoin was established in its technical aspect as an exchange currency implemented on blockchain technology (Blockchain), with which a public information network is generated that allows users to exchange, keeping their data safe thanks to encryption.
Each block within that chain is a set of complex mathematical equations. Every new block is validated by the rest of the chain, this prevents the set from being altered and, simultaneously, allows tracking the movements of each Bitcoin within the chain; This is called traceability.
These characteristics are the basis of its most challenging aspect for the traditional economy, since since it validates itself and cannot be obtained in ways that escape its rules, for Bitcoin there is no issuing authority. Contrary to the foreign exchange market, there is no one on it. There are no central banks!
Decentralized and deflationary?
There is no one who can regulate the price of Bitcoin because no one can control its stocks. When economies need dynamism, or in some other cases, central banks inject liquidity into the market (print money) and this can have a long-term loss of value effect.
Higher supply equals lower value. It was this negative effect that led Satoshi Nakamoto to propose “a free, decentralized currency, whose value is governed only by supply and demand. In passing, he thought about how to solve the inflation problem. So he decided to put a cap on circulation.
Bitcoin is finite. There is a maximum of 21 million units, but currently only 18 million 900,306 circulate according to data from the CoinMarketCap platform. Theoretically, the creator or creators of this asset proposed with its development a new path —viable or not— for the economy.
If correct, Bitcoin would become an asset to beat inflation, a deflationary model that would strengthen over time due to lower supply and because these characteristics would increase its demand. For its enthusiasts, it is the main attraction of the main cryptocurrency.
How to get Bitcoins?
There are two ways to get Bitcoins: the first is to exchange them for the equivalent of their price in fiat money, products or services with someone who owns them. The second is data mining, a mathematical and technological process with which they release new blocks from the chain.
With each new Bitcoin mined the equations become more difficult, something that, in Nakamoto’s theory, would also contribute to the constant appreciation of the cryptocurrency. For some analysts, this condition today allows it to compete with gold for the value safeguard market, even without a winner.
But mining has also played against the adoption of Bitcoin. Its high energy and economic costs place this activity among the least accessible and ecological investments. Obtaining it worldwide generates a footprint larger than that of some countries, in addition to very high costs.
Market under construction?
Bitcoin was created as a way to empower the user in an organic financial environment, which would also allow him to avoid the reductions to his capital that imply inflation and commissions. It also pursued healthy secrecy, with traceability to guarantee transparency in the market.
But there are still unanswered challenges such as infrastructure, which today is not enough and represents a significant barrier to its adoption. In addition, the costs that central banks absorb in the traditional economy pass to the user, as well as the responsibilities in terms of safeguarding.
Even Bitcoin users find it inconvenient to apply the theory. The initial approach of a free asset for exchange between equals is limited by strong fluctuations in price that make it difficult to use it as a means of payment. Others believe that it is a market under construction.
The reality is that the surprising and wide variations in price are the cost of a freedom that is pursued in theory, but that leaves the possessor at the mercy of supply and demand. For now, the price supports only in part, the appreciation ideas, but there are many obstacles still unanswered.
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Bitcoin: everything you need to know about the most popular cryptocurrency