a year ago · 3 min read
The value of the granddaddy of cryptocurrency has plunged by nearly 50% after a massive rise in value. Here’s what you need to know.
What is bitcoin?
Bitcoin is the first cryptocurrency that is a decentralised digital currency that you can buy, sell and exchange directly without an intermediary like a bank. Each bitcoin is a hugely complicated computer code that’s hard to create and can’t be copied. The reason it’s deemed valuable is simply because we, as people, decided it has value. Same as in the olden days, when people used to trade using shells, barley, feathers, or even cows.
Since its public launch in 2009, just after the Global Financial Crisis, Bitcoin has risen dramatically in value. Investors begin treating it as a sort of digital gold to hedge against inflation.
How does it work?
They basically convert the underlying real world assets to crypto format for the ease of moving it around. You can send gold or dollars equivalent to anyone around the world at a lower fee and less friction.
Bitcoin is built on a distributed digital record called a blockchain. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack or cheat the system. It’s a digital ledger of transactions that’s duplicated and distributed across the entire network of computer systems on the blockchain. Everytime a new transaction occurs on the blockchain, a record of the transactions is added to every participant’s ledger. Each block is chained together, linked to the data of the previous block. This means if one block in one chain was changed, it would be immediately apparent it had been tampered with. This makes it impossible for hackers to corrupt a blockchain system, because they would have to change every block in the chain across all of the distributed versions of the chain.
What do its backers say about it?
Cryptocurrency like bitcoin solves consensus issues that exist today such as the GameStop incident which serves as an example of how a technology-enabled, decentralised future can balance the power that isn't so concentrated among the always-winners. For them it is the construction of a new financial system.
“Regulators in some jurisdictions will try to curtail activity in this space, but because of its nature as a peer-to-peer technology, that’s a very difficult thing to do. It’s far wiser for regulators to spend their time thinking about allowing crypto to interact with our traditional legacy financial system. That’s a much better way for regulators then to get to know the technology and to get to know this asset class.” – said Hester Peirce, Commissioner, US, Securities and Exchange Commission.
Crypto is accessible to everyone with internet access. That’s the future. It’s focusing on decentralisation and gove