You may have heard of Bitcoin by now, and the hype it had over the last few weeks, reaching all-time highs that boom, dropping over $1,000 within minutes, and a few days later, hitting a new all-time high.
Seven years ago 10,000 bitcoins were used to buy two pizzas. Now, one is worth over $10,000.
But what is Bitcoin really?
Basically, it’s a new form of currency known as cryptocurrency or crypto for short. It’s not like everyday paper money that we’re used to, but a form of digital currency invented by a mysterious person known as Satoshi Nakamoto.
The goal was to create a peer-to-peer system for online payments. p2p means that it’s decentralized, and works independently of any financial institution.
Think of it like this, when you go into a coffee shop to buy a latte with your bank card. You don’t actually give any money to the cafe on the bank does with digital currency. There are no banks, no entities, or governments that control it, eliminating the need for a middleman.
So where does Bitcoin come from?
Well, it’s mined, not with the traditional pickaxe, but with computing complex mathematical equations. Once the equations are solved, new Bitcoins are generated or mined, the term mining is commonly used because like our mineral resources, there’s a limited number of bitcoins out there.
In the case of Bitcoin, that number is 21 million periods. But there’s more. Miners don’t only generate new Bitcoins. They use their computers to verify transactions and prevent fraud 24 hours a day.
This is done by collecting all transactions made during a set period into a list called the block.
It’s the miner’s job to confirm those transactions and write them into a general ledger, which kind of resembles a huge giant, universally accessible spreadsheet.
So instead of one person controlling everything, there are 1000s of computers around the world connected to a network, which all come to an agreement on which transactions are valid.
But how does it do all this?
By using something called blockchain? If Bitcoin is email, then blockchain is the internet. It’s a whole ecosystem that we’ll cover in another video. Another thing to mention mining Bitcoin is costly.
There’s the high cost of electricity and the hardware components wearing out and individual mining Bitcoin would find it really difficult to make any money that way.
That’s why there are Bitcoin farms around the world mining, processing, and verifying transactions, where people can invest in them and get a small percentage of the returns.
Alternatively, Bitcoin can be traded on many exchanges and exchanges a marketplace where you may buy or sell your crypto in exchange for regular currencies.
There are many exchanges that any person can use coin base bid tricks and crack are some of the most popular.
Do you think Bitcoin is gonna revolutionize how we use and think about money?
Or is it just hype?