The world has worked on trust ever-since, and even today the monetary transactions and the products and services that are exchanged happen on the basis of trust. The medium that we use, however, is somewhat complicated. We use government-issued currency, that is verified as a legal tender by our governments and banks. The banks act as a third-party to validate a transaction.
You can see the money you received or sent, in your banking app – simple as that. And to maintain those accounts, and validate those transactions, the banks have always charged a nominal fee. A small amount that doesn’t hurt anyone’s pocket. But the underlying question has always remained – why should someone involve a third party, to send his earned money to someone he wants to?
The Beginning of a FinTech Revolution
To solve this problem, and to come up with a transparent system that is complex enough to tamper with – Satoshi Nakamoto (an anonymous entity), came up with a system of ledger and cryptocurrency, called Bitcoin, powered by the blockchain algorithm. According to his idea, the universal ledger is like a book that everyone in the world can keep. Every transaction is written on that book and locked with a secure key. Every next transaction that happens is locked with a key that has some information from the previous transaction as well. This is what makes it almost impossible to tamper with. Nobody can change even one entry in his own book because every transaction inside every book in the world must match. Even one changed entry will be notified and corrected by the network.
The system was secure and meddle-resistant, and to power this system, a currency was developed called Bitcoin. Bitcoin has become a popular topic of discussion, after its price sky-rocketed and touched $10,000 milestone, something that was deemed unachievable by the experts, and some economists also called it a bubble that was due to burst.
But then it went on to touch a little short of $20,000, and unfortunately, it crashed down back to $10,000 recently (as of early 2018). Earlier, the concept of Bitcoin was alien to people because of the high level of technical information involved, but now anyone can buy or sell Bitcoin easily on several online platforms.
The True Price of Bitcoin
The price of Bitcoin is always a matter of concern for people who invest in it, because it is their hard-earned money after-all. But one thing that anyone investing in Bitcoin should understand is that Bitcoin is largely decentralized. Its price is heavily determined by demand and supply, just like Gold. Comparing Bitcoin with Gold won’t be wrong, because honestly, there is no value of either of them. Both can either be worth a million dollars, or an absolute zero. The value only depends upon, what the other person is willing to pay to you in return for that commodity.
Understanding how Bitcoin Mining works
Another interesting concept to understand about Bitcoin is – mining. Many people remain unaware and confused when the term mining is mentioned to them. The most peculiar thing about Bitcoin is – the number of coins are limited. Unlimited Bitcoins cannot be mined. This mining is not like the traditional metal-ore mining, but it happens using the processing power of computers. Every transaction that happens on the Bitcoin network, is put in a block, and every block has a finite number of transactions. Miners get to verify the transactions, by solving the puzzle that Bitcoin’s blockchain algorithm provides them, and for validating one block worth of transactions, they are paid in a certain number of Bitcoins.
The number started with 50, when Bitcoin started, back in 2009. But every four years it is halved. Currently, the number of Bitcoins a miner gets is 12.5, and that is how the value is now worth thousands of dollars because the number has reduced sufficiently. In coming years, the number of Bitcoin-reward will further half down to 6.25 and then 3.125, and so on. By the year 2140, it is estimated that 21 million Bitcoins will be mined in the world.
The aim of Bitcoin is to remove the intermediaries like banks. The chance of error with human intervention is 40%, which is scarily high. By removing human intervention completely, and increasing dependency on computing power, Bitcoin intends to provide a 100% error-free mechanism to validate transactions, along with an absolute, tamper-free proof of those transactions that will stay on the network for years to come.
That is one reason why Bitcoin is being heavily adopted by big companies across the globe, and even some countries like Japan have accepted cryptocurrencies on a large scale.
The future of Bitcoin is uncertain, but if we think about the number of possibilities that it can help come true, it can reach new heights. With changing technology, and fast pacing world, we also need a transaction system that is secure enough, and Bitcoin satisfies every one of those needs. The only challenge that it has, as of now is the speed of transactions. It is damagingly slow, and Bitcoin network has been working on that already. With some hard-forks in future and adaptation of the lightning network by the Bitcoin community, even this issue can be solved, and Bitcoin can emerge as an unbeatable tech of the future.