Bitcoin-the digital currency that will disrupt the future financial world
In the 21st century, humans are facing a full-blown digital revolution! The emergence of Bitcoin has sent shockwaves through the world. Bitcoin has the potential to disrupt the traditional financial and banking industries.
Being the first digital currency, Bitcoin represents the future. It will create huge wealth and has massive investment value. It is worth learning about this new digital asset that will be traded on Qidax, the innovative trading platform based in Australia.
As a rising global currency, Bitcoin has become a major threat to traditional financial institutions and even central governments. Decentralized digital currency solves the fundamental problem of central banks’ control over currency issuance caused by the oversupply of currencies, which in turn triggers inflation and plunders the wealth of people and businesses.
The Problem of Conventional Currency
The root problem with conventional currency is that trust is required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We must trust them with our privacy, trust them not to let identity thieves drain our accounts.
The Bitcoin Solution
To solve this issue, Satoshi proposed an e-currency based on cryptographic proof. Without the need to trust a third party, money can be securely transacted.
The solution is a combination of digital signatures and a peer to peer (P2P) distributed system with no single point of failure. Users hold the crypto keys to their own money and transact directly with each other using a digital signature, with the help of the P2P network to check for double-spending. Satoshi called this e-currency Bitcoin.
Bitcoin is a decentralized digital currency without a central bank or single administrator. It can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called the blockchain.
A Brief History of Bitcoin
The idea of creating digital money without a trusted third party was not conceived by Satoshi but was proposed by advocates such as Wei Dai and Nick Szabo more than a decade before the successful launch of Bitcoin.
Bitcoin was invented by Satoshi Nakamoto on 31 October 2008. That year, they posted a paper called Bitcoin — A Peer to Peer Electronic Cash System to a mailing list discussion on cryptography. Satoshi Nakamoto’s real identity remains a mystery to this day.
On 3 January 2009, the bitcoin network came into existence with Satoshi Nakamoto mining the genesis block of bitcoin (block number 0), which had a reward of 50 bitcoins generated at 18:15:05 (GMT). These 50 BTC were sent to the Genesis Block Address:
The number of bitcoins owned by Satoshi Nakamoto is 1,148,800. The bulk of the first 36,000 blocks was mined by one computer which belongs to Satoshi. 63% of this was never spent, leaving Satoshi with a fortune of over 1.1 million BTC, equivalent to USD$11 billion today.
On Jan. 12, Hal Finney was the recipient of the first Bitcoin transaction when Satoshi sent ten coins to him as a test. He was also the first person besides Satoshi to run the bitcoin network. With no competition, he was able to mine as much as a hundred coins a day using only his old PC’s off-the-shelf CPU.
After mining a thousand coins, Finney turned the machine off, as he and his son were worried the computer was overheating. The stash of bitcoins sat on Finney’s hard drive and was later burned to a DVD, left to gather dust.
The next time he heard of Bitcoin was late 2010, when he was surprised to find that it was not only still going on, bitcoins had monetary value. He quickly dusted off his old wallet and was relieved to discover that his bitcoins were still intact. As the price climbed, he transferred his coins into an offline wallet.
On May 22, 2010, Laszlo Hanyecz, aka ‘Bitcoin Pizza Guy’, bought two Papa John’s pizzas (worth $30) for 10,000 BTC. At the time, that seemed like a bargain, given Bitcoin’s low value. Today, one BTC is worth $10,000. So that is $100 million for the pizza!
On May 20, 2020, a significant event had occurred that could change the value of bitcoin forever. Yet, even with increased public awareness, it was an event that few are talking about — even though it has already happened twice before. It was the halving of Bitcoin.
Unlike fiat currencies, which can be printed by central banks at will, the supply of bitcoin is limited algorithmically. There will only ever be 21 million bitcoins in existence. This makes it a deflationary asset, as opposed to an inflationary one.
The halving of block rewards is a feature programmed into bitcoin and occurs every four years (210,000 blocks). This process will continue until the last bitcoin is mined in the year 2140. The block reward has been reduced to 6.25 BTC from the previous 12.5 BTC.
The block reward halving tends to have long-term positive effects on the price of bitcoin. If fewer bitcoins are being generated, the newly increased scarcity automatically makes them more valuable. According to previous data, there should be huge room for Bitcoin’s price to rise.
When the first halving occurred, BTC went from $11 to $1,100, then back down to $220. For the second halving, BTC went from $230 to $20,000, back down to $4,000, then rose again to $10,000. What will be the price this time when the halving occurred in May? The current price is trading around $9200 but several Bitcoin experts have predicted it could rise above $10,000 and beyond soon.
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