To the average Joe, Jane, or non-binary Jac, who works 9-5 in a regular job, gets paid real money at the end of the month, the concept of cryptocurrencies can be extremely mind-boggling.
Our schools didn’t teach us that. And obscure terms such as blockchain, mining, crypto wallets, simply add to the confusion. Coupled with how volatile the market can seem to be, that’s what makes many of us unwilling to invest in electronic currencies, or even want to read about it.
Today, let’s take a little history lesson down the rocky road of Bitcoin (BTC), explain some terms in a really easy-to-understand way, and maybe even get you started in becoming an owner of a cryptocurrency.
WHAT IS BITCOIN (BTC)?
Digital money. Just like the US Dollar, Euro, or Japanese Yen, BTC is its own currency that lives on the internet. Like regular money, it can be used to buy both on and offline products and services, traded with other types of online currencies, and changes value from time to time.
It is decentralized and 100% transparent. Which means that it’s not controlled by any government or bank, and the public can access, at any time, every single transaction made for every “dollar”. That’s because every transaction is recorded on a chain of events for that very “dollar” you are using, this is also called a blockchain.
It’s Peer-2-Peer, or P2P. When we make an online money transfer to a friend, there’s always a middle person, such as a bank, who makes that transaction happen. But with BTC, it’s like passing the money hand-to-hand, straight to the other person. This just means it’s safer (no more waiting for “the bank to process the payment”) and instantaneous.
Today, since its launch in 2009, BTC’s value has gone from practically zero in its initial months, to a high of 1 (the Bitcoin unit of measurement) BTC : US$64,800 in April 2021, and has been fluctuating around US$30,000 in the first half of 2022. Yes, as you can tell, its value is definitely more of a rollercoaster than traditional paper currencies.
WHO GAVE BIRTH TO BTC?
Back in 1992, cryptographers Cynthia Dwork and Moni Naor came up with the concept that solutions to computational puzzles could have some value. This is somewhat similar to the idea that if you’re the first student in class to solve a maths problem, you could kinda sell it to the other kids for money. But in the terms of cryptocurrencies, it’s computers solving digital problems and getting “paid” for it, this process is also called “mining”.
So based on this original idea, some super smart people have come up with their own digital currencies, including b-money and Bit Gold. In the process, they’ve added a bunch of security measures and protocols to make transactions more secure, and transparent.
Then on 3 January 2009, the very first BTC block was mined by a mysterious Satoshi Nakamoto. This Genesis Block, also aptly numbered Block Number 0, had a reward of 50 BTCs (which basically had no real-money value then). The real interesting bit, though, is that embedded in this coin is the 3 Jan 2009 headline of UK newspaper The Times,
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”.
Feels like a revolution is coming, isn’t it? And guess what, there has been much speculation, but up till today, nobody knows who the real Satoshi Nakamoto is. It could be a person, a group, a non-Japanese, or a bunch of bankers.
10,000 BTC FOR 2 PIZZAS
The early adopters downloaded the BTC software and started mining their own Bitcoins. In a historic move, on 22 May 2010, the first-ever “real” item was bought using 10,000 mined BTC - two pizzas delivered from a local pizzeria in Florida, USA.
Seeing that BTC was actually worth something, organisations started to accept BTC as payment and donation, and in 2013, The Internet Archive, a US-based non-profit body, even gave employees the option of receiving part of their salary in BTC. In the USA, companies Abra and Milo have even allowed potential homeowners to secure a home using crypto-backed home loans, while other firms have started to offer properties that could be bought using BTC.
Today, numerous major companies, including fast-food giants KFC and Subway, Mircrosoft, and AT&T, are accepting BTC as a form of payment. You can even buy a Gucci with BTC in a few of its stores in New York, LA, and Miami, and it’s got plans to roll out the project across the entire North America.
The increase in demand, plus the increased efforts in mining, which takes a lot of computing power and electricity, helped BTC rise in value to what it is today.
THE REGULATIONS AND THE ISSUES
Of course, when there’s an unregulated market which can be used to buy or sell just about anything, the governments and financial ministries have been keeping a close watch. And in 2013, the US set up the Financial Crimes Enforcement Network (FinCEN), in an effort to prevent criminal organizations or individuals from using the BTC network to launder money.
Over the past decade, there have also been reports of company accounts and individual coin wallets being hacked, currency theft, network issues, all which made the BTC value fluctuate greatly, leading to many financial experts labelling cryptocurrencies as “bubbles”, “a hoax”, or even “delusion”.
Many countries, including China, still do not allow the purchase of real-world items with BTC, while some others have imposed taxation on income made through BTC transactions. On the other side of the spectrum, we see trailblazers in the crypto realm. El Savador became the first country to make BTC legal tender in 2021, followed by the Central African Republic in April this year.
THE FUTURE OF CRYPTO
Is BTC a bubble? Or is it on its way to become “digital gold”? Since its launch more than a decade ago, we have seen multiple international corporations, and even governments, adopting it as a form of payment. Plus, the fact that it is a monetary system that is basically tamper proof (no new BTCs can be mined once it reaches its maximum number of 21 million units), we can safely say that BTC is here to stay.
What we know for sure is that cryptocurrencies and crypto trading is only on its way up. With more government support and infrastructure improvements everyday, we’re excited to see cryptocurrencies becoming an important part of our everyday lives.
Looking into learning more about the world of cryptocurrencies and trading? Our experts at Bit.com are here to help you make sense of it all, and make money safely. Why wait? Sign up on Bit.com, and Switch on Your Future.