In the sphere of digital currency, Bitcoin is the forerunner. It not only paved the way for over 5,000 cryptocurrencies, but it is also the most well-known of them all. Bitcoin has been making headlines since its price surged from $1 to $32 in just three months in 2011, resulting in a 3200 percent increase in value. The tremendous volatility of the cryptocurrency market has always aroused investors’ curiosity, since earnings might soar one day and plummet the next. Despite the fact that it has been the topic of numerous debates, it has become a widely accepted method of payment in various nations. For example, PayPal, the online payment company, has permitted its clients to purchase and trade Bitcoins since October 2020.
What is Bitcoin?
Bitcoin is a one-of-a-kind currency. Since its inception, it has been a difficult custom to maintain. It’s a decentralized currency that doesn’t have any regulators or administrators. All world currencies are governed by central banks, with the exception of cryptocurrencies, which have only been around for a fraction of a second if the whole history of humanity were compressed into twenty-four hours. When Satoshi Nakamoto, a pseudonym, invented the Bitcoin in early 2009, he did so under the name Satoshi Nakamoto. Many theories have been proposed as to why the creator’s identity is kept hidden. Some assume that it is to protect the creator’s privacy because the creator would have attracted media and government attention. Another motivation might be security, as the inventor could be attacked by governments in response to established payment and banking systems being endangered. The inventor, like someone who owns a large number of bitcoins, may also be vulnerable to theft and other harms. The creator’s life could be jeopardized if he or she is exposed.
When the banking infrastructure crumbled in 2008 as a result of the financial crisis of 2007-2008, Nakamoto created bitcoin in an attempt to shift away from traditional banking institutions. While bitcoins are not yet the standard form of currency for everyday transactions, as they were meant to be, they have gained traction and paved the path for other cryptocurrencies to enter the market. It is currently regarded as a store of value and an inflation hedge. One of the barriers to it being a mainstream cash system could be its valuation. This is both a benefit and a disadvantage of cryptocurrencies.
The symbol “₿” stands for bitcoin, as opposed to “₿”, which stands for the Thai baht. Bitcoin coins were formed as a form of payment for a process known as “mining.” Bitcoin mining is the process of circulating digital currency through the economy. It is carried out using powerful computers, and despite the fact that the process is extremely costly and time-consuming, it attracts to a huge number of investors. Investors are drawn to it because it allows them to earn cryptocurrencies without ever having to deposit money.
Let’s look into the past of ₿itcoin
Bitcoin’s journey began on August 18, 2008, with the registration of the domain name “bitcoin.org.” On October 31, 2008, Satoshi Nakamoto announced the coin to the Cryptography Mailing List at Metzdowd.com. Bitcoin: A Peer-to-Peer Electronic Cash System” is the headline of this announcement, which can be found on bitcoin.org. Bitcoin was the first to use peer-to-peer technology, which is a network made up of two or more computers that share resources without having to go through a separate server computer. This enables bitcoin miners to participate in the network’s transaction processing on the blockchain, providing sufficient motivation through rewards.
The genesis block, also known as block 0 or block 1, was mined for the first time on January 3rd, 2009. It has issued a paragraph as verification that the block was truly mined.
Bitcoin announced its first version of software on January 8, 2009, using the same Cryptography Mailing List. Bitcoin mining began on January 9th of that year, with Block 1 being mined.
Bitcoin’s price has risen and fallen several times in its short history. Because cryptocurrencies have such fluctuating markets, there is a lot of uncertainty in the market. To add to the confusion, because the cryptocurrency market is not controlled in a legal sense, there are issues like scams and frauds in circulation. This has a tendency to influence bitcoin’s price.
- The first bitcoin bubble came in 2011, when the bitcoin was worth $32 instead of $1. The price of bitcoin had risen to $2 by November of that year. This illustrates the degree of bitcoin’s volatility. However, by May of the following year, the price of bitcoin had improved to $4.8, and by August, it had risen to $13.2.
- The second bubble happened in 2013, when bitcoins were trading at $13.4. During the second boom, the price of bitcoin soared to $220 at the start of April, before plummeting to $70 by the middle of the month. Two different bitcoin bubbles occurred in the same year.
- In October of that year, the third bubble popped. The digital money was initially valued at $123.2, but by December, it had risen to $1156.1. The price increase was just temporary; three days later, the price had dropped to $760. Following this, the price of bitcoin had numerous drops until it peaked at $315 in early 2013.
- The next bubble occurred between the beginning of 2017 and the conclusion of the same year. The price of bitcoin was bouncing about $1000 at the start of the year. However, after only two months, the slump began. However, by March 25th, 2017, the price had risen to $975.7, and by December 17th, it had risen to $20,089, which was a significant increase. Bitcoin has been in the spotlight since December 2017. Governments and economists have taken notice of it. This was also the start of the digital currency market becoming competitive, as other companies began to develop cryptocurrencies to compete with bitcoin.
- Bitcoin’s price grew steadily over the next two years, eventually surpassing $10,000 in June 2019. Although there was some fluctuation in the price and the price increased and fell, the bitcoin market remained and thrived. However, the world economy came to a halt as the Covid-19 epidemic broke out. Bitcoin’s price soared from $7,200 at the start of 2020 to $18,353 on November 23 as a result of this. The reason for the price increase is because government initiatives have acted as a stimulant. Bitcoin will be worth $24,000 by the end of 2020.
- The bitcoin price achieved a new high on January 8, 2021. Bitcoin was worth $41,528 at the time. This pricing, however, did not stay long; after three days, the price had risen to $30,525.39.
- Bitcoin hit a new high in April 2021, when it traded for more than $63,000. Following that, the price plummeted, and it is now trading at roughly $35,000.
We can gain a picture of the cycle structure by looking at bitcoin price bubbles. Because bitcoin is still relatively young, historical trends or cycles can be used to forecast and make investment decisions.
How Does Bitcoin Work?
Bitcoin was designed with the intention of being used as a wallet. It’s essentially a computer file that stores digital cash. Khalti, Fonepay, eSewa, and numerous bank mobile apps are examples of digital wallets or phone apps we utilize. However, instead of using our old currencies, which are governed by the monetary authorities of each existing economy, we utilize bitcoin to buy and sell daily essentials. Traditional currencies have governments that monitor spending, whereas bitcoin uses blockchain to track transactions.
Bitcoin transactions are verified by a network of computers and stored in a blockchain, which is a type of ledger. Blockchain is a ground-breaking technology that has been dubbed the “next big thing” after the internet. To put it another way, the blockchain connects a body of data made up of units called blocks that contain information about each and every transaction, such as date and time, buyer and seller, and an identification code. Each transaction’s entries are grouped together in chronological sequence.
Bitcoin mining has become available today. It’s essentially how new transactions are added to the bitcoin blockchain. It is, however, a choice. Those who choose to mine bitcoin do so through a mechanism known as “proof of work,” which organizes computers to solve mathematical puzzles that validate transactions. Miners, also known as miners, are compensated with fresh bitcoins. Mining necessitates the use of powerful computers to solve puzzles that become increasingly difficult as time passes, necessitating additional resources.
Individuals can acquire access to more bitcoins via these methods. Those who aren’t familiar with coding may find this intimidating. Bitcoins, on the other hand, are a different type of investment. Individuals can purchase bitcoins by making investments. Bitcoins are treated like stocks and bonds, allowing investors to diversify their holdings. For the time being, they are a store of value, and they may become a new kind of currency transaction in the near future. Because bitcoins are unregulated, tax consequences on bitcoin investments should be considered. Additionally, because bitcoin and other cryptocurrencies are still illegal in Nepal, legal repercussions must also be considered.