What is Bitcoin? Unpacking the World’s Most Popular Cryptocurrency

Bitcoin is the world’s most well-known cryptocurrency. During the Great Bitcoin Bubble of 2017/2018, everyone started paying attention to the sector and its premier asset.

Since the bursting of the bubble in early 2018, Bitcoin managed to form a stable floor of support under $4,000. The price has plenty of support and resistance around the $6,000 and $10,000 levels as well.

Crypto experts continue to tout Bitcoin as a potential candidate for the foundation of the new financial system. However, the reality is that the entire crypto space is worth around $224-billion, and Bitcoin accounts for 64% of that figure.

What is Bitcoin?

So, what is Bitcoin? Where did it come from, and who designed the protocol? The fact is that no-one knows who created the Bitcoin protocol. In 1999, a designer named “Satoshi Nakamoto” wrote a whitepaper on Bitcoin and distributed it on an open platform.

No-one ever discovered Santoshi’s identity, and he remains an enigma to this day. There are all types of speculation about the origin and identity of Satoshi Nakamoto. Some claim he’s a talented anarchistic software programmer, others claim he’s a hacker with ties to the anonymous group, and further speculation says it’s the CIA acting out a plan for the new world order.

The reality is that no-one knows his identity. Recently, legendary software programmer, John MacAfee claimed in a broadcast that he knows the identity of Satoshi and that it’s easy for anyone to figure it out if they know where to look. Experts remain skeptical about MacAfee’s claims that he knows the identity of Nakamoto.

How Does It Work?

Bitcoin works off a protocol called “Sha256.” It’s this fact that leads to the CIA conspiracy that Bitcoin is a government psy-op designed to get us moving away from using cash. The CIA was, in fact, the creators of the SHA256 protocol that forms the backbone of the Bitcoin network, known as the “Blockchain.”

The Blockchain is a ledger kept by every computer running the protocol, allowing for the real-time verifications of all Bitcoin transactions by systems connected to the network. Miners run this code through a system, and receive “block” rewards of coins, at 12.5-coins per block.

In May 2020, the Blockchain “halving” event will reduce the reward from 12.5 to 6.75-BTC per block. Miners will choose to sell BTC to exchanges that then pass the Bitcoins onto the public.

What are the Features of Bitcoin?

Bitcoin is a decentralized currency. In other words, it doesn’t rely on any government or central bank to set its price. Bitcoin gets its price discovery from the open market, based on what people are willing to buy and sell the asset for on exchanges.

Bitcoin fulfills many of the roles of money. It’s a medium of exchange that many dealers accept online. It’s divisible and fungible, meaning you can make change, and 1-BTC is equal to 1-BTC, no matter where you go in the world. The only difference between money like gold and Bitcoin is its store of value.

Bitcoin is a notoriously volatile asset. In one year, we saw the price go from a little over $1,000, to $20,000, in what was possibly the biggest mania in modern financial history.

See actual price here

The decentralized nature of Bitcoin means that no government can control Bitcoin and decide the future of the asset. That’s appealing to investors looking for alternative financial assets not linked to the fiat system.

The Team Behind Bitcoin

As mentioned, no-one knows the real identity of the creator of Bitcoin. However, that hasn’t stopped developers from working on the project. Over recent years, talented developers made numerous changes to the protocol to produce of other coins in events known as “forks.”

There are developers from every country around the world working on tech to build the Bitcoin community. From Bitcoin ATMs to innovative mobile payment methods and faster transaction times – Bitcoin continues to improve into the future.

What are the Advantages and Disadvantages of Bitcoin?

There are plenty of advantages and disadvantages of using Bitcoin. Let’s unpack the pros of the cryptocurrency first.

Pros of Bitcoin

  • Decentralized asset, the price set by the market

  • Anonymous transactions online

  • More retailers and business starting to accept BTC

  • Plenty of ATMs around the globe

  • Not linked to the current financial system

  • Has a unique and independent payments ecosystem

Cons of Bitcoin

  • Exchanges are centralizing the nature of Bitcoin

  • Valued in USD

  • A speculative asset with high price volatility

  • Risk of EMP (Electromagnetic pulse)

  • Grid failure or internet failure could cause a collapse

  • Too many whales control the price action

How Do I Buy Bitcoin?

You can purchase Bitcoin from several sources. First, you can buy it from friends, or have someone donate it to your wallet. If you want to swap fiat currency like dollars for your BTC, then you’ll need to deal with a regulated exchange like Coinbase or LocalBitcoins.

You can make your deposit using credit cards, bank or wire transfers, and PayPal payments. The charges are high for credit cards and payment services like PayPal, so wire transfer for the cheapest rate.

What are the Recommended Exchanges for Trading Bitcoin?

If you want to start trading Bitcoin, then you have the option of trading on a crypto-to-crypto pair or a crypto-to-fiat pair. For crypto-to-fiat, you’ll need to deal with regulated exchanges like Coinbase Pro.

Other unregulated exchanges might not provide fiat functionality on its platform, only allowing deposits in crypto.

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Should you Invest in Bitcoin?

Sure, investing in Bitcoin is a great way to diversify your portfolio and acquire alternative financial assets. No-one knows what the future holds for Bitcoin. Some experts believe that the introduction of quantum computing may cause the entire crypto sphere to go obsolete. Others think that Bitcoin will be worth $100,000 within the next 2 to 5-years.

Who you choose to believe is up to you. However, be careful when considering investment advice from anyone, and always speak to your financial advisor before investing your money into any assets class.

As some final food for thought – In the height of the 2017 BTC bubble, people were selling their homes to invest in Bitcoin and taking on second mortgages. These people lost everything because they didn’t take the time to research their decisions. Make sure that doesn’t happen to you.