20 May, 2018 | Blogs
You probably remember hearing about Bitcoin reaching an all-time high of $1400 last month, then $2700, and just last weekend it reached $3000. Its value didn’t rest at $3000, as its exchange value quickly decreased down to $2800, and now it’s at about $2500. In 2015, it was named the top performing currency in the world. So, what is it? And what is going on?!
Bitcoin is defined as a digital form of currency, a cryptocurrency, a network that enables a new payment system through a form of digital money. It is the first form of cryptocurrency and the most heard of. It is a decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, it is pretty much like cash for the Internet. It was launched in 2009 by a person (or persons) known only by the pseudonym Satoshi Nakamoto, who didn’t intend for it to be an online currency, but rather a “peer-to-peer cash system”.
Unlike traditional currencies, which are issued by central banks, Bitcoin has no central monetary authority. It rather runs on Blockchain, which can be thought of as a form of ledger that contains all Bitcoin transactions.
Note: check our post on the 4 differences between Bitcoin wallets and different forms of online payments .
Bitcoin works by Transactions – private keys
A transaction is a transfer of value between Bitcoin wallets that gets included in the Blockchain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes. Individuals download a Bitcoin wallet which holds the account for the user. One simply visits a Bitcoin dealer (online or offline) and exchanges currencies. The dealer then transfers the requested amount to the desired wallet, a process that takes a few moments.
Bitcoin’s exchange price has been fluctuating since it was introduced in 2009, while reaching an all-time high of $3000 just last weekend, on the 11th of June. So, what is the cause of all this?
The value of Bitcoin is based upon the trust of its users. Whether the currency is recognized by countries or not, its value utterly comes from the users believe. To keep it simple, it’s the law of supply and demand. The more people adopt it, accept it, and trust it, the higher the value. The rate of adoption is the main reason why its price rises or falls. Any bad news regarding this cryptocurrency that might discourage people from using the currency, will in return cause a drop in the price. Speaking of bad news, the Ransomware massive attack that took place last month gave Bitcoin a very bad name. Those infected by the virus were asked to make payments using it.
Back in April, the Japanese government passed a that recognized Bitcoin as a legal method of payment. This law encouraged investors and traders to exchange yen for the digital currency, which in turn led to an increase in the its exchange price.
What does the future hold?
Jeremy Liew, the co-founder of Blockchain, predicted that Bitcoin will reach a price of $500,000 by 2030. This prediction was based on three reasons:
The use of Bitcoin and its wallets for money transfers has been increasing over the past few years in China. Jeremy Liew saw that people will more likely be inclined to use Bitcoin and its wallets for their money transfers since it’s an inexpensive alternative to other available means.
Liew also pointed out that political uncertainty around the world would cause an increase in interest in Bitcoin.
The last reason Liew used for his prediction was the increasing mobile penetration around the world. Liew’s prediction goes on to mention that noncash transactions are expected to rise from 15% to 30% in the next 10 years, with Bitcoin accounting to 50% of all non-cash transactions.
I’d take the above-mentioned reasons with a grain of salt. If anything, they are mere predictions and a lot of things could go wrong. For example, China is trying to benefit from any trade done using Bitcoin by implementing a 0.2% fee on all Bitcoin transactions, and other countries could soon follow. Also, the US has rejected two Bitcoin exchange funds till now. It is true that its price has risen significantly over the past couple of months, but will it continue to do so?
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