It’s hard to understand the most popular cryptocurrency. Bitcoin is a real head scratcher among financial advisors. Its value skyrocketed from zero to about 60,000 in just a few years.
The total number of Bitcoin is limited and equals 21 million. With the current bitcoin price of about $70,000 the market cap is 1.4 trillion. Bitcoin is fully independent. There is no country or entity behind it, there’s no one who governs it or who could decide its value. It’s spread all over the world among thousands of computers- nodes and there’s no central server which means it can’t be hacked.
Bitcoin is based on blockchain technology that uses hash values and cryptography to register the right transactions in an online ledger. The transactions are organized into blocks of data that are joined together forming a chain. Each block can contain from a few to a few thousand transactions and is connected to a preceding block. That way fraud is prevented. This way any change to a given block will be quickly detected as its hash value is strictly dependent on the block that was created beforehand.
Each Bitcoin is assigned to its owner. There are no straight bitcoins. To make a payment each user must set up their digital wallet that is identified with two keys. One key is a private key and is used to access the funds gathered in the wallet. Other key is public which is simply an address that can be likened to a bank account number. It is public and used to receive payments in bitcoin.
Each public key can be accessed in an online public ledger where everybody can track all transactions made with a given account. However, public keys are autonomous and its owners can be identified only on a pseudonym level. Miners are computers dispersed all over the world that run a special Bitcoin software allowing them to create Bitcoins and oversee blockchain transactions. The reward comes from two sources – transaction fees and newly created Bitcoins that come into being each time a new block is created which is roughly every 10 minutes. It started from 50 Bitcoins per block now it is 6.5 bitcoin. This value changes every two and a half years and it’s called halving. With time Bitcoin appreciates in value as there remain less and less coins to be mined.
The most frequent Bitcoin question is whether it is safe. Taking into consideration the mechanics and nuts and bolts of blockchain the answer is yes definitely. However, it’s as safe as the private key. If it gets lost or stolen there’s no way to retrieve the lost coins. That’s why everybody should come up with their own way to securely store their private key which is the password to their digital wallet.
