What do Virgin Records’s Richard Branson, Jamie Foxx, Lamborghini, and Wiki Leaks have in common? The Bitcoin! Bitcoins are digital currency whose origins are obscure. At one time, it was said to be the brainchild of Elon Musk. Rumor has it that a person using the pseudonym Satoshi Nakamura allegedly invented it – which is why the biggest chain of bitcoin “ATMS” sprouting in London is called Satoshi’s Point.
Imagine it as money on your hard drive that can be kept in your “e-wallet” to spend. Though is not backed-up by any bank or government, you can pay merchants globally and even make a hefty commission from transaction fees. At the moment, even celebrities consider bitcoins hot property. But then again, it can be this generation’s “fool’s gold”.
What is Bitcoin
Bitcoin is defined as peer-to-peer, decentralized digital currency which does not use banknotes or minted coins. Instead has “coins” are identified by a unique registration number and a record of who owns them. It is an alternative payment system where bitcoins can be transferred instantly online to another party with a Bitcoin address.
The exchange totally bypasses physical banks or other conduits (e.g Paypal). It uses a cryptographically provable way to ensure that the “money” sent by the sender is received securely by the receiver. This address is a unique destination composed of 26-35 alphanumeric numbers and is a single-use token for a specific amount. It is not a wallet and does not contain balances. You can get a Bitcoin address for each transaction in a number of ways:
- use Bitcoin Core
- or use an account at an online wallet service/software or an exchange
- or use a software for offline generation of case-sensitive numbers.
Bitcoin as an Investment
Like any commodity that promises fast returns, it is widely speculated. It so volatile that some countries have even banned it, especially since its value can drop by 80% in a matter of seconds! The anonymity also made it vulnerable attracting shady characters who thought that the system was easy picking.
Recently, the acknowledgment of JP Morgan, one of the oldest and most trusted banks lent it credibility. Moreover, there are cash machines solely for bitcoins in Vancouver, London and other key cities. Will Bitcoin ATMs mushroom in the near future? Thomas Heath of the Washington Post says that bitcoins have increased in value 10 times during the year. In fact, it has already gone mainstream in the U.S. when the Commodity Futures Trading Commission approved bitcoin trading, with Nasdaq to follow suit in 2018.
The concept is embedded in paradox – it is invisible but can be mined. You can earn small amounts by solving math problems (like how you level up in gaming) but the supply is not inexhaustible. The number of bitcoins is pegged at 21 million, predicted to be reached by 2140. The doubling time for one user, Alex Millar is 4.1 months computed from an initial investment of $.05 on July 17, 2010, to $375 in Dec. 6, 2014, approximately 53 months later.
The website https://blockchain.info gives you a daily snapshot of Bitcoin’s current growth. It also has a link for getting a free wallet and the running figures for the day’s transactions. This screenshot taken Dec. 5, 2017, shows a double growth over a 3 month period. From about $5,000 in September, it rose to just under $11,000 in December.
This exponential rise is something that can be heady or scary. For every investor flushed with the thrill of fast profit, there is another one in mortal fear of an impending bubble burst. Is this incredible growth even sustainable? Bitcoin investment is not all roses. In fact, with one of the biggest in the industry declared bankruptcy. The caveat is that Bitcoin is investing and gambling in equal parts. The value is determined by the supply and demand of the market; typically there will be winners and losers.
“And now here is my secret, a very simple secret: It is only with the heart that one can see rightly; what is essential is invisible to the eye.” – Antoine de Saint-Exupéry, The Little Prince
Understanding how Bitcoins work in sending, receiving, mining, and speculation is difficult. We are working with a totally different paradigm and set of values. But with its promise of fast returns, is could be the ultimate investment for you.
|Bitcoin Logo. Author=Satoshi |Permission=Released into public domain by author