When you think of currency, the first thing that comes to mind might be dollar bills and those annoying coins. If you are part of the credit generation (which, let’s face it, most of us are), we think of credit cards and interest rates. However, over the past half-decade, a new player has entered the currency game, and a lot of people still haven’t caught on or simply don’t fully understand what it is.
Bitcoin is the first entirely digital currency to hit the market and have an immediate splash into the world economy. So, what exactly is Bitcoin?
Simply put, it is a mathematical-based currency created and used exclusively on the internet. It works by existing solely in a digital world and has uses from buying goods and services to helping run very complex mathematical problems for some of the world’s largest servers.
It was founded by Sastushi Nakamoto on October 31st, 2008. Nakamoto proposed this new form of currency based on mathematical proofs, which can be very complex and hard to solve. Bitcoin has several features that are entirely exclusive to the internet – some of these include low interest rates and a decentralized institution.
So who can buy into this digital currency? Anyone can obtain and use Bitcoins, regardless of age, location or technical savvy. Bitcoin has a worldwide exchange rate, therefore it is a very popular form of currency for almost every country on the planet.
The way in which Bitcoins are created is rather mind-boggling. Unless you have an advanced mathematics degree, the whole process likely won’t make sense (don’t feel bad, we don’t fully get it either). In a nutshell, the coins are “mined” using computer capabilities within a network or servers. However, if you’re thinking this means it’s an unlimited amount of currency, think again.
Like many physical currencies, there are a limited amount of Bitcoins that will be made available at any given time. This not only helps regulate its exchange rate, but it also serves to maintain the value of each Bitcoin. Because just like in real-money economies, the more Bitcoins available, the less each Bitcoin will be worth. As of November 2014, the number of coins “mined” is around 13.5 million, with a hard cap of 21 million. That leaves around 7.5 million left to be created before all are held by people online.
The Bitcoin has had a very interesting, short, and exciting past. When Bitcoin first hit the market, its price stayed fairly low for a few years, and then in April of 2011 it passed a dollar per coin. From there it steadily rose, due mainly to the online community getting wind of it and spreading its popularity
People all over the world use Bitcoin every day, from the United States to China to India. As of this year, the biggest user of Bitcoins in the world is China, with roughly 32.5 percent of all exchanges in the form of Bitcoins. The fact that China, which is quickly becoming a world leader in economic growth, is using this form of currency shows that they are progressive in the new ways of digital currencies.
Bitcoin values peaked in December of 2013 at an astounding 1,242 dollars per one USD. This was mainly due to China allowing the Bitcoin into its economy. Shortly after, China banned the use of Bitcoins, but illegal Bitcoin trading within China still continued.
Bitcoin keeps the names and addresses of its owners completely anonymous. Once a user pays for something with Bitcoin, other people then can see how many Bitcoins that person has and where they are stored.
Like many other online transactions, an advantage of using Bitcoins is its super-fast processing times. Bitcoin experienced a distributed denial of service attack from online hackers in 2011, which caused the value of Bitcoin to dive. However, shortly after the attack the prices went back up. This is one of the few risks associated with online currencies, yet every currency has its own risks that should be weighed when deciding which to invest in.
Bitcoin is considered to be the pioneer of future online digital currency, and since its inception it has done nothing but get more and more popular. People in the United States are even starting to accept the new culture of Bitcoin. John Mauldin, Chairman of the United States Federal Reserve, was recently quoted in an interview with Forbes as saying, “…What is remarkable is the story of zero to 6 million. It’s already happened!” When the Federal Reserve Chairman publicly states that online currency is “remarkable,” it’s a statement that creates waves and makes people notice this new currency of the future.
As companies around the world are starting to take notice of the use of Bitcoins in currency, more and more of them are starting to accept this as a form of payment. Big name brands like including Dell, Dish Network, Expedia and even 1-800-Flowers have opened up to the world of Bitcoin. With such a wide range of companies accepting it for many different products, it’s only a matter of time before more and more and even bigger companies start to accept this as the new normal. Bitcoin, from here, has nowhere to go but up.
As of right now, Bitcoin has a relatively low worth – the current exchange rate of 1 Bitcoin equaling 249.28 United States dollars. So if you’ve been thinking about investing in this currency, now would be a good time to consider it. Keep in mind that at one point 1 Bitcoin was worth over 1,200 USD, so it could very well happen again.
The world economy still has an effect on every world currency, including Bitcoin, however the online currency is more stable than most other forms of money. With only a few million Bitcoins left for people, the value of the coin has nowhere to go but up. One thing’s for sure – nobody really knows how much longer they will be available.