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What you need to know about bitcoin and why it’s so popular

So, what is bitcoin and why should we be paying attention — or not paying attention — to this cryptocurrency. The decision is yours. Let’s start with the basics and to be honest, I’m learning about this as well. Bitcoin is a cryptocurrency or in its simplest form it is a digital form of money. These virtual currencies held whispers of being the currency of the future, which would make sense since we are living in an increasingly digital world.

Bitcoin’s origins can be traced back to 2008 and was founded by inventor Satoshi Nakamoto, a relatively unknown inventor who never came forward to the public. Some people believe he/she was operating under an alias. Nakamoto succeeded at what many companies failed to do in the 90’s — to create a digital currency. In fact, it was not his intention to create a digital currency, but to invent a ‘peer-to-peer electronic cash system.’ What does this mean? He essentially created a virtual market for trade that has no central entity or or single administrator. This virtual space enables worldwide payment and in this virtual market, trade is only allowed if specific conditions are met. This is the exact way a currency works and thus bitcoin was born.

Once a transaction is requested, it is validated through a code of algorithms sent to a peer-to-peer network. Bitcoin is not redeemable for any other commodity (as of yet) and doesn’t exist in a physical form, only in the network. The supply is not controlled by an administration like a bank.

As the buzz for bitcoin began entering the news space, it made sense for investors, banks, and even regular people to start paying attention and consider trading in this virtual currency. As of Jan. 1  2017, one bitcoin was trading for $960 per coin and as of Dec. 5, 2018 ,one coin trades for $11,816.93 USD.In Canada. that would trade for $14,990.48 CAD. It reached the $10,000 mark just last week. So much buzz has been generated by bitcoin and everyone has questions.

This is not the first time there was a surge in the proposed value of bitcoin. Back in 2013, major Canadian banks, such as RBC, TD, and Scotiabank, made the move to make it difficult for investors who trade in bitcoin to convert this digital currency into real cash. Back in 2013, one coin was going for a bit over $1000. Banks froze the accounts of Bitcoin traders and middlemen like bitcoin brokerages. Banks can collect millions of dollars in wire transfer fees, but in an uncontrolled bitcoin market there are no fees and as it is gaining popularity, many banks and financial institutions have started paying attention to their proposed digital competition.

The rise in popularity of bitcoin is determined by perception and interest in the market. The price of bitcoin is determined by the economic basis of supply and demand. For bitcoin to have value, people need to trust the adoptive use of this digital trade in the market-space. If you were to compare it to gold, which had a physical presence and is more demanding to acquire, supporters would say one bitcoin coin is easier to acquire though it doesn’t exist in a physical form. This trade becomes based on trust.

What can you purchase with bitcoin? Many technology companies have adjusted their payment models to include a bitcoin options, like Microsoft and Dell. Gift card companies for Walmart, Amazon, Target, and Nike now accept bitcoin. Jewelry and travel companies are also jumping on the bitcoin bandwagon.

With the anonymous and mysterious veil over the use of bitcoin, it also brought forth a negative impact. It can be used for illegal trade and potentially cause alarm for law enforcement as they try to determine how bitcoin can be related to issued in the real world. Also the fact it is unregulated leaves room for manipulation and fraudulent cases.

So, will bitcoin continue to rise and will more people put their trust into this digital currency? There are only two ways to go —up or down.

What are your thoughts or theories on the use of bitcoin and will this digital coin fare will in financial crisis? Comment below.