What is Bitcoin?


What is Bitcoin?

Maybe you here it many times in the news, radio, ads etc., but you have no clue, what it is? Me neither until some months ago, I started to find out more about it. At that time I’ve thought, why digital money? Paypal is doing a good job already. You can transfer your money instantly. So why digital money then? That’s why when I’ve heard for the first time the term bitcoin, I didn’t take it seriously. After I’ve found out what Bitcoin is really about, I start to take it more seriously.

The founder of Bitcoin published a white paper 31st October 2008 right after financial crisis in 2007, which was caused by the banks. In Germany the government rescued the bank system with €290 billions. Because the banks weren’t trustworthy, he started to create the 1st bitcoins on 3rd January 2009. At that time 1 bitcoin was less than $0.01. On 2010 each bitcoin was priced less than $1. The first altcoin was in 2011.

Coin market cap

Now, a decade later each bitcoin is worth about $8000 USD with 1506 altcoins. But why does it get so popular? It has some great features. For example you can’t fake it. It is possible a normal fiat money, but it is impossible to duplicate this digital currency, because it based on cryptography. Besides it is decentralized, which means you can transfer money directly to the other person without intermediaries. In this case a bank is not necessary any more, which is not trustful anyways according to the founder. This decentralization is based on the blockchain technology. On top the idea of this digital currency is to have faster transfers and lower transaction fees. In 2015 the transaction fee was $0.01 USD, but now to transfer bitcoins the transaction fee was even up to $40 USD, which means if you want to buy a $10 USD pizza, you have to pay the transaction fee on top, which make $50 USD in total.

That’s ridiculous. Additionally, it is not scalable, because now the energy consumption gets to high. To make any transactions, it would consume as much energy as a house would consume for a week. That’s why its market share dropped in 2016 from about 90% to 35%.  Even after many forks to Bitcoin Cash, Bitcoin Gold, SegWit etc. to increase the scalability, altcoins are still on the rise. There is even an altcoin now, which has no transaction fee, instant transfer and endless scalability. It’s the same thing with the computers in the 20th century, where it was really big, slow and consumed a lot of energy. In 1943 the IBM president Thomas Watson said, that the world market would need about 5 computers. Now we know, he was wrong.

Because of its disruptive potential many people get scared of it. Cryptocurrencies are still emerging. It is not implemented worldwide yet and the oldest one exists not even a decade. We will see, what will happen in the next decades.

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