Our world is drastically changing, and new products that can affect our society in a huge manner have quickly developed and become part of the Zeitgeist; one of these products is the Blockchain, and its main derivative, Bitcoin. But what exactly is bitcoin?
The project’s origin
Bitcoin is, as described in its Whitepaper by its anonymous founder who goes by the alias Satoshi Nakamoto: “A peer to peer electronic cash system”.
This means a way to exchange value between peers without the need for a centralised third party who handles and/or distributes it, such as banks or governments.
Someone created the Bitcoin Blockchain at the beginning of 2009, nearly 14 years ago. The cryptocurrency is a reward for users, known as validators, who keep the chain of data going; the data in question is transaction history for Bitcoin. Users who have enough Computer power compete for finding different blocks’ hashes to validate the transactions; this process is known as Bitcoin Mining.
As stated previously, no one knows who the founder of this blcokchain is; whoever is responsible has a static account containing 1 million BTC, which are now worth several billion dollars. You might be asking yourself, what is the real use for this digital currrency?
Having complete control of a currency in the hands of a centralised institution of any kind means it (and the entirety of our monetary system) will follow this institution’s intentions and policy, which could vary significantly from what is objectively best for a currency; this means no cap on its production in times of need, which leads to inflation, depreciating value, and little to no backing from finite and stable assets such as gold, as seen in the handling of the U.S. Dollar initiated by the F.D.R. and Reagan administrations.
What are Bitcoin’s pros and cons?
Bitcoin, which functiones in a completely decentralised manner because it is a product of its Blockchain functioning (see our previous article regarding the technology), has a finite and non modifiable supply of 21 Million, and a steady mining rate which sends a constant and finite amount of Bitcoin into circulation every day and witnesses a halving every four years or so: this all means the last Bitcoin will be mined by the Blockchain’s components by 2140, and limited supply which prevents inflation.
Bitcoin’s main vulnerabilities are its adoption rate which is still low (but projected to grow exponentially), and the little regulation of its market and sector, which leads to over leveraging on the markets (too much borrowing when trading the asset) and frequent liquidity manipulation. Another hot topic is its impact on the environment, especially in these times of rising ecological alert; While the Bitcoin chain has proven scalability and adaptability and has been proven by numerous studies as non damaging to nature, the main worry is the sheer number of blockchains currently active; there are over 15000 cryptocurrencies built on several hundred blockchains, all functioning on computer power; as adoption grows, problems could arise because of this disproportionate amount of projects.
The short term perpectives for the Cryptocurrency are tainted by its media coverage and market flaws, but if someone is looking to preserve the value of their wealth, look no further; regardless of its value in dollars, Bitcoin’s supply will always be finite. As you can see in the table above, Its attributes are objectively many and complete, and it makes The internet its base, which will only be to its advantage in the coming years.
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