What is Bitcoin?
Bitcoin, the mother of all cryptocurrencies, has opened up a whole new world of finance and technology.
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Bitcoin defies logic, challenges convention and since its invention in 2008 has opened the door to a new wave of innovation in finance and technology.
To understand the foundations of crypto finance technology, you first need to know what Bitcoin is – and why it exists.
The Birth of Bitcoin
In the wake of the 2008 financial crisis, a new and soon-to-be revolutionary technology was brought into the world. Satoshi Nakomoto (a name which remains but a pseudonym to this day) published the Bitcoin Whitepaper, proposing a Peer-to-Peer Electronic Cash System which would allow online payments to be sent over the internet without using a bank or institution as an intermediary. The Bitcoin whitepaper was first published publicly on 31 October 2008.
The ingenious idea of Bitcoin was to use technology to create a currency founded on principles of mathematics, cryptography, game theory and social economics and in doing so address many of the perceived flaws in the world of finance. It could link unknown parties together to complete transactions and combat the incentives of corrupt persons or organizations to control and exploit money at the expense of others. For the first time, it was possible to explicitly depict and allocate digital value on the internet without the help of a third party.
Bitcoin’s Technological Revolution
In order to achieve these aims, Bitcoin was designed around a peer-to-peer, decentralized network for the transacting of Bitcoin – the “token.”
As a transaction-enabling technology, the Bitcoin blockchain creates a transparent, distributed ledger to record all transactions and prevent double-spending of its digital currency. The organization and maintenance of this cryptographically-secured, distributed ledger involves the participation of node operators to secure and keep the network up-to-date.
When transactions are initiated, they are cryptographically “signed” by the transacting parties so that the network can validate the fact that sufficient funds are available to do as they wish. Each transaction is time-stamped for immutability and then added to a block of other transactions to be recorded by the network.
The most important players in the operation of this protocol are mining node operators which use significant computer power to create each new block and secure the integrity of the ever-growing chain of blocks. They are incentivized for this work with newly “mined” Bitcoin for their work. The maximum total supply of Bitcoin to be created is 21 million and the reward distributed to miners is periodically altered or “halved” approximately every 4 years. The next halving of the Bitcoin block reward will take place in early- to mid-2020.
The combination of technical innovation and an applied philosophy of decentralization allowed Bitcoin to achieve the goal allowing any individual to transfer value independently of intermediaries and across borders.
Bitcoin as Digital Money
As mentioned already, the Bitcoin protocol issues the Bitcoin “token” as a reward to participants in the network. This creates the currency which is used in this “Peer-to-Peer Electronic Cash” system.
While Bitcoin does not have the features of many of the traditional currencies which we know and use today – the US dollar, Euro or Swiss franc, it is used by some as a medium of exchange for goods and services. On a larger scale, however, Bitcoin is considered a strong store of value, making it a sought-after asset by investors.
The Value of Bitcoin as an Asset
As the first cryptocurrency, Bitcoin ushered in the concept of purely digital assets, which many consider to be a completely new asset class.
Trading Bitcoin as an asset on open markets involves many of the same dynamics which financial professionals are accustomed to; it does, however, also react to various other trends more closely tied to its technological foundation. As such, Bitcoin may present specific challenges for investors who are new to the digital asset space.
Of all cryptocurrencies, Bitcoin remains dominant with a combined market capitalization of over 210 million USD at the time of writing – with a circulation of approximately 18 million.
Bitcoin is traded across a wide range of marketplaces and exchanges. Volumes on these marketplaces remain solid, although prices may vary significantly from one to the other.
Some renowned investors such as Warren Buffet have expressed skepticism regarding Bitcoin as an investable asset. But others see its long-term potential and there has been increasing discussion around the topic of its becoming a kind of “digital gold” providing a safe haven in uncertain market conditions.
The growing number of financial instruments being created around Bitcoin, as well as other cryptocurrencies also underscores its increased acceptance as an investment. Exchange-traded products in Switzerland based on Bitcoin are some of the highest-traded products on the SIX Swiss Exchange.
Conclusion
Bitcoin is here to stay. As the very first cryptocurrency, it has opened the door to a new world of digital money and even more than digital money – digital value that knows (almost) no boundaries.
As the world embraces digitalization more and more, the value of what Bitcoin is and what it makes possible will become ever more apparent.
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DevelopmentThe weekly chart shows how many times it became near-term overbought, and how many corrections it had, on its previous post-halving bullish run where it went up by 20x.In July 2017, mining pools and companies representing roughly 80 percent to 90 percent of bitcoin computing power voted to incorporate a technology known as a segregated witness, called SegWit2x.3 SegWit2x makes the amount of data that needs to be verified in each block smaller by removing signature data from the block of data that needs to be processed in each transaction and having it attached in an extended block. Signature data has been estimated to account for up to 65 percent of data processed in each block, so this is not an insignificant technological shift. Talk of doubling the size of blocks from 1 MB to 2 MB ramped up in 2017 and 2018, and, as of February 2019, the average block size of bitcoin increased to 1.305 MB, surpassing previous records. By January 2020, however, block size has declined back toward 1 MB on average.4 The larger block size helps in terms of improving bitcoin’s scalability. In September 2017, research released by cryptocurrency exchange BitMex showed that SegWit implementation had helped increase the block size, amid a steady adoption rate for the technology.5рулетка bitcoin
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