One of the most commented subjects of 2017, Bitcoin has been calling people’s attention by the technology used and the escalation of its value. Despite being difficult to follow its price, the definition of Bitcoin is quite simple. Just like dollar or real, it’s a currency. The difference is that it’s virtual and its price is not determined by some wealth existing in the material world, but by society instead. If you found it a bit confusing, calm down! We’ll explain better:
The difference between Bitcoin and other currencies that we know:
- It’s a digital currency, i.e., you won’t have it in your wallet — at least, not physically, since storage is done in digital wallets. Bitcoins are stored on the computer or even a flash drive.
- It is not controlled by any bank, financial institution, company or country. The internet itself handles the currency. The transactions are made directly, without any intermediary: money goes from your wallet straight to the recipient’s.
- Bitcoins work through blockchain technology (thence called cryptocurrencies). It may sound complicated, but it’s a pretty simple system: blockchain works through blocks of information, like “Lego” that joins each other. Each block has a limit of information that can be stored then creating a new one. They cannot be modified or excluded, so it’s considered a secure database. All transactions in Bitcoin are made this way and can be seen by anyone who accesses your wallet, so there’s a lot of expectation regarding the currency — it could hinder corruption, for example.
- Each Bitcoin value is not subject to an amount of existing wealth. Therefore, there is no amount of something tangible to guide the currency’s price as happened to the gold in the past. Bitcoin’s value is defined by the market, that is, it can vary. In November, for example, the rate of change was 46%. So why do people buy Bitcoins? They believe that others will accept this kind of currency, the same way they use Real for shopping today.
- There are only 21 million Bitcoins. Yeah, that’s right. Not all are in circulation right now — they need to be mining by computers, as well as the gold needed to be excavated. It’s an activity that requires a lot of energy, so many people doubt that the cryptocurrencies are the future of the financial market.
If it’s a currency, why is it causing such a fuss then?
Bitcoin is drawing attention for its exponential recovery. In 2010, two years after its creation, it was worth $0.06. On 8 December 2017, it hit the mark of $17,000. During this period, the currency’s value exceeded $1,000 a few times — until this year.
Since then, the value of each Bitcoin increases practically every day. At the beginning of the boom, one of the predictions made was that the coin would hit $10,000 by the end of 2017. Now it’s closer to hit $20,000 and three weeks and there are still 3 weeks to finish this year.
This escalation made many people to express themselves on the subject, whether positively or negatively. The President of the American bank J. P. Morgan, Jamie Dimon, even called Bitcoin a fraud, but more and more people and financial institutions are interested in the cryptocurrency.
But what if…
Bitcoin is not the only cryptocurrency in the market, there are a thousand other options (seriously). Here’s a question: if at some point its value drops, will the other cryptocurrencies be valued? After all, the blockchain technology would be welcome in today’s societies, since all transactions are recorded in the database with public information and is not possible to hide money or steal identities. Moreover, they are recognized worldwide and currently have no transaction fees.
Although the possibilities of Bitcoin and cryptocurrencies are much appreciated, we must recognize that, now, its practical uses are minimal. The number of establishments that accept the currency is growing, but is still insufficient for someone let the money aside and use Bitcoin in your day to day life. The future, however, promises to be more and more digital.