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Understanding Bitcoin

| February 08, 2018
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We do everything online: shop, stock, build businesses, communicate with friends. It only makes sense that this new world would eventually develop its own currency. In 2009, Bitcoin did just that, opening the door to the world of cryptocurrency and changing the way we look at finance forever.

Despite the many other forms of currency that have joined since then, Bitcoin continues to reign supreme with its value at approximately $7,000 per Bitcoin. While the value has recently dropped, it’s important to wonder why this digital currency is worth so much compared to the few hundred of its competitors.

Innovation

One of the reasons could be the blockchain, the very foundation of the Bitcoin transactions that we explained in our previous blog post. Even when the bitcoin itself was thought to have little to no value, the blockchain was considered to be the actual innovation that was heralding in a new world of financial opportunity. Banks began experimenting with the blockchain just as credit cards became more common than physical cash. By association, the Bitcoin brand also began to grow in value.

Global Impact

The other reason that Bitcoin grew in value was the fact that it was cut off from the political and financial turmoil that the world was experiencing at the time. The United States was just coming out of recession when Bitcoin began, and financiers appreciated the fact that politics couldn’t touch Bitcoin. It’s not associated with any country. Therefore, it’s worth was not determined by a country’s policy and could be considered a more stable investment in that sense.

Rarity

Out of all the forms or cryptocurrency, Bitcoin has been out the longest and has some the smallest circulation supply.  With a little over 16,600,000 Bitcoins in circulation, the value can skyrocket when the demand is high. Also, due to the way cryptocurrency works, it is nearly impossible to create new Bitcoins without the company distributing it.

The Risk

Although Bitcoin is valued for thousands of dollars, recent drops in cryptocurrency should be taken into account. Within the last several weeks, Bitcoin’s value dropped approximately $3000. There is no doubt that cryptocurrency is a risky investment regarding future profit. It is still a very new concept. It doesn’t deal with banks or governments. It is completely uncentralized. There is no physical value.

However, should Bitcoin and Cryptocurrency stabilize it has the potential to be a lucrative option to invest in without the risk of anyone stealing. Once a transaction is verified, it is in the blockchain forever. The question remains if you are willing to take this leap of faith into the future.

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