Bitcoin mysteriously appeared in the aftermath of the 2008 financial crisis. The original Bitcoin whitepaper was released by an entity known as Satoshi Nakamoto at the end of 2008, shortly after Lehman Brothers filed for Chapter 11 bankruptcy. Nakamoto published the whitepaper on a cryptography mailing list. In early 2009, Bitcoin, the cryptocurrency, was officially launched. The first Bitcoin was mined in January of that year by Satoshi Nakamoto himself/herself/itself. No one knows the true identity of Satoshi Nakamoto. Some believe it is an individual, some believe it is a group of people. Satoshi Nakamoto is just an alias. When Bitcoin was first created, the value of one Bitcoin was almost nothing. Now, however, one Bitcoin is worth roughly $8,210.
Bitcoin runs on “blockchain technology.” Blockchain technology is essentially an open source, universal ledger that records every single transaction in “blocks.” These blocks, are added to a “chain” as they are created. In this way, every single transaction that occurs on the Bitcoin network is publicly recorded. However, because public and private key cryptography is used to conceal the identities of the users, it is designed for anonymous transactions. “Miners” validate every transaction and are rewarded for doing this by receiving a certain amount of Bitcoins.
An Alternative to Fiat Currencies
Bitcoin is designed to be an alternative to fiat, government-issued currencies. This is because Bitcoin is not issued by any government, and unlike fiat currencies, there is a very finite amount of Bitcoin. In fact, there are only 21 million that will ever come into existence. Fiat currencies can be printed indefinitely. The hard cap on the currency supply is designed to prevent inflation. Inflation is a problem that most fiat currencies eventually experience as the issuers of such currencies tend to expand supplies too far. An example of this would be the multi-trillion dollar quantitative easing program launched by the U.S. government to try to prop up the markets following the 2008 financial crisis.
Bitcoin has become known as one of the most volatile assets of all time. Oftentimes, Bitcoin’s volatility goes upwards, and earns investors incredible gains in a short amount of time. However, occasionally, this volatility goes downwards too. Every once in a while, the price of Bitcoin even tends to drop by 50–70 percent. However, the currency has a habit of going on to make higher highs even despite the sudden drops it periodically experiences.
Store of Value
Since it’s roughly ten years in existence, Bitcoin has become known as a long-term store of value. It is often referred to as digital gold. It has many of the properties of gold. For example, it is portable, fungible, divisible, durable, and scarce. All of these properties are important for a long-term store of value to have. Bitcoin’s scarcity distinguishes significantly from fiat currencies, which many people argue are poor stores of value due to inflation.
Bitcoin was the original cryptocurrency and had the first mover advantage. It has been the king of cryptocurrencies ever since it was created and has retained the number one spot in terms of largest overall market caps for roughly a decade. Bitcoin is also the most well-known cryptocurrency around the world. It is very likely that Bitcoin will continue to keep its top spot as the largest cryptocurrency. There is a very good chance that Bitcoin will follow the trend that it has been following for the past ten years, which is generally upward, with periodic, significant price drops.