Heard of Bitcoin? Here’s why most people have: In 2009, a single Bitcoin was worth 76 thousandths of a one cent. That’s right, .00076 of a single US cent. At the end of 2017, that same single Bitcoin was priced at just over 15 thousand dollars, $15,093 to be precise. If you had spent 76 cents and bought one thousand Bitcoins in 2009, you would be a multimillionaire today.
Before we understand this exponential growth, however, it is important to answer a basic yet complicated questions.
What is Bitcoin?
The first Bitcoin was created on January 3, 2009, by an anonymous individual or group under the name Satoshi Nakamoto. It was released as open-source software, which basically means that the ability to use Bitcoin is public and anyone can use it. US currency is issued by the government and mainly controlled by big banks. With Bitcoin, the power is with the people. Anyone can find Bitcoins through a process called ‘mining.’ Miners have the ability to use high-powered computer software to solve math problems and analyze algorithms as a method to find Bitcoins. There are two main reason for the mining process. First, once the Bitcoin technology is spread more, mining will provide a smart, fair way to issue currency rather than putting our money in the hands of big banks. Second, the fairness and hopeful accessibility will incentivise more people to mine as Bitcoin grows.
Why was Bitcoin created?
Sometimes referred to as “the honest currency,” Bitcoin was created as a response to the catastrophic economic collapse in 2008, when major US banks collapsed. When millions of Americans lost their life savings in 2008, people began to question the crucial and monumental role that banks and the government play in our economy.
Different college professors might define money differently, but generally the concept of money is an accounting system to track who has what. People give and take money, and the amount of money any given person has changes frequently. Also, with money, comes the need of a trusted third party. This third party is the main issuer of money, makes money, verifies your money is real. They can also monitor transactions and perform a plethora of other services in our economy. It might be somewhat obvious by now what the major third parties in our monetary system are. There are two big ones: the government and banks.
When these third parties malfunctioned in the crisis in 2008, American citizens paid the price.
This is where Bitcoin revolutionizes the way we look at money and currency. Bitcoin is not electronic money. Using Bitcoin is not comparable to using Apple Pay or Venmo. Bitcoin is its own, new type of money. With Bitcoin, all need for these trusted third parties dissipates. “I’ve been working on a new electronic cash system that is fully peer to peer, with no trusted third party” said Satoshi Nakamoto in his plans for Bitcoin.
With Bitcoin, the function a bank or the government normally serves is fully automated in something called an open ledger. With each Bitcoin transaction– when people exchange Bitcoins — the Bitcoin software on your computer or phone records what happened and stores it. That data is not owned by anyone or any company as opposed to a big bank.
Who Created Bitcoin?
This is one of the most fascinating questions surrounding Bitcoin. While the project was released in 2009 by an individual or group named Satoshi Nakamoto, nobody really knows who Nakamoto is. His identity has been concealed since the launch of Bitcoin. There have been many people suspected of being Satoshi Nakamoto, but the true identity of the creator of Bitcoin is unknown.
Even before Nakamoto, the creation of Bitcoin can be linked to something called the CypherPunk movement. The CypherPunk movement can be traced back to 1985, and it is the idea of moving society toward the use of high-level cryptography and enhanced privacy. In other words, it was the first idea to drop third parties like banks and give people more privacy and power. “We cannot expect governments, corporations, or other large, faceless organizations to grant us privacy,” Eric Hughes said in his CypherPunks manifesto.
In 1992, a small group of people became the original CypherPunks when they met in person in San Francisco to discuss the future of the CypherPunk movement. In the coming years, the CypherPunk movement grew to become big mailing lists and communication groups.
Then, in 2008, an anonymous individual named Satoshi Nakamoto released an essay-of-sorts that detailed the ideas and plans for a new type of decentralized currency called Bitcoin.
Nobody knew who he, she or they were. Since then, there have been many people suspected of being Satoshi Nakamoto, most of whom were members of the CypherPunk movement. Despite various theories, there hasn’t been any hard evidence to show that any one person is in fact Nakamoto. Every person presumed of being Satoshi has denied it, leaving the mystery unanswered.
Bitcoin Over the Years
Since its launch in 2009, Bitcoin has has many highs and lows. Early on, people thought the name Bitcoin would be tarnished forever because of its ties to the black market for drugs and illegal substances. This was seen through an online marketplace called the “Silk Road.” It was an online black market where people used Bitcoin to acquire drugs like marijuana, cocaine and heroin. Through the use of Bitcoin, the Silk Road was a Tor-hidden service on the dark web, which basically means users could use Bitcoin and browse the the site without the risk of being monitored. When the website’s creator and individuals on the board of Bitcoin were arrested by FBI in October 2013, Bitcoin prices plummeted. Despite the occasional bumps in the road, however, Bitcoin maintains a overall upward trend. In December 2017, Bitcoin peaked at $18,922.78. Its growth late last year was unparalleled, which is one reason the up-and-coming currency received so much media attention. Since the new year, Bitcoin has not been able to sustain its soaring prices. Since it peak in December, it has dropped currently to a price of just under $9,000.
The Future of Bitcoin
Looking to the future, Nakamoto planned well. Every currency system has the potential for major consequences, one of which is inflation. The Zimbabwe economy is an example. When the government in Zimbabwe printed too much money, it resulted in serious inflation, leaving millionaires starving and homeless and causing the people to lose trust in the government. For this reason, there is a cap on Bitcoins, which is 21 million.
By the year 2140, we are scheduled to have all 21 million coins in circulation. However, to allow Bitcoin to continue expanding, each Bitcoin can be broken up into tiny little pieces. In other words, you don’t need to buy an entire coin. Bitcoin has the potential to not just change our economy in the US, but the way the entire world views currency.
Roughly half of human adults don’t have the luxury of having a bank account and can’t utilize technology such as phones or computers when making exchanges. With Venmo or Uber, your account is linked to a bank. With Bitcoin, people across the globe may have the power to have their own bank because Bitcoin gives this power to the people using it.