What is Bitcoin?
Investors and journalists have likened the rush to invest in cryptocurrencies such as bitcoin to the American gold rush in the mid-19th century. Others likened the digital currency craze to the 18th-century Dutch mania for tulips. It remains to be seen whether Bitcoin and its digital cousins will last and become the new gold standard, or whether they will crash the market like the Dutch tulip mania.
Digital currency
Digital currencies or cryptocurrencies are electronic tokens generated by computer networks to replace traditional currencies. Paying with digital currency is different from paying with a credit card, debit card, PayPal or ApplePay, which all provide electronic access to traditional currencies such as USD, GBP, and CNY.
The value of digital currency e-tokens is based on the exchange of traditional currencies and commodities for tokens through specialized internet exchanges such as BitPay. These exchanges work similarly to PayPal but are not affiliated with the company. Traditional currencies and commodities are worth the same as gold according to national and international banking standards.
The creation of digital currency
To create a cryptocurrency, a distributed network of computers in a closed, internet-based community works with a complex set of encryption algorithms, and the output of a specialized program is the cryptocurrency represented by a digital token. Tokens are valid only for transactions within the digital community, where individuals and organizations can open accounts (also known as wallets) in professional communities.
Value of bitcoin
As of August 2017, Bitcoin’s distributed transaction value was close to $5,000. That was far more than the gold value of about $1,300 at the time. However, within two weeks of the digital currency reaching its high waters, Bitcoin’s value fell to around $3,000. Anyone who invested real money in Bitcoin in mid-August and did not exit the market before the price dropped lost nearly 40% of their investment.
Thanks to its status as the world’s most popular digital currency, the Bitcoin community itself has become a standard, like foreshadowing exchanges on Wall Street, London and Japan. Therefore, when other digital currency markets falter, the value of Bitcoin also falls. In the case of Bitcoin’s massive drop in value in late August 2017, it happened because other cryptocurrencies lost support from the Chinese government after spreading through China at an alarming rate in 2017.
Bitcoin Security
There have been nearly a dozen cryptocurrency exchange hacks since 2010. Losses in the hundreds of millions (USD). In relative terms, however, traditional banks and financial institutions lost billions of dollars to cybercriminals over the same period. Programmers and the cryptocurrency community are working hard to identify and fix vulnerabilities in their blockchain networks. In fact, if bitcoin were to become a currency acceptable to true suppliers, then national central banks could replace their role with sophisticated computer algorithms.
On a personal level, anyone investing in Bitcoin should have proper internet security measures in place before accessing financial information and conducting transactions.
sources:
informastre.com/what-is-bitcoin/
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