Bitcoin is the original digital currency or cryptocurrency. It was developed by a person(possibly multiple people) under the pseudonym Satoshi Nakamoto and released in October of 2009, although it didn’t start to gain any traction until May the following year. Unlike fiat currencies(US Dollar) which are managed and printed by central banks. Bitcoin is managed by a decentralized system which in theory shouldn’t allow for control by any one group.
But how does it work?
Bitcoins are generated through a process called mining. Mining involves running a computer program that processes BTC transactions, and runs a mathematical equation to generate new coins. In the past, people simply ran the program on their home computers. However, as the technology has progressed mining has moved on from CPU processing, to GPU processing, and now on to custom dedicated rigs that do nothing but mine.
So, you can generate unlimited Bitcoins with a computer?
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No. In the hopes of avoiding the inflation that has plagued virtually every other currency in history, BTC was designed to allow for no more than 21 million coins in circulation at any given time. Currently, there are roughly 15 million BTC in circulation. Now, you may be thinking, 21 million units is not enough to share between a global population that is closing in on 8 billion, and you’re right. A single Bitcoin can be broken up into much smaller units(kind of like pennies) called Satoshis.
1 Satoshi = 0.00000001 BTC
So the total amount of BTC spending units is actually closer to 2,100,000,000,000,000 or two-quadrillion one-hundred-trillion, which sounds like it should be enough, but, realistically that would only provide for (very)roughly 260,000 units per person. I’ll let you decide if that will be enough.
When Bitcoin was released it was with the hopes of taking power from the central banks and replacing mainstream currencies. For better or worse, depending on your perspective, BTC just hasn’t made that mainstream impact yet, but, it is making some pretty significant strides.
For more on that and what else to expect, let’s examine 5 trends facing Bitcoin in 2017.
Increased global regulation
Ironically, the very same central banks and government regulations that BTC was designed to circumvent, will be the deciding factor in its mainstream acceptance. As this is being written, BTC is in the middle of shattering its previous record price of roughly $1100. At this very moment it sits at $1515 after falling to $935 at the end of March.
The reason behind this sudden price-hike is a mixture of new regulations in China and the currency being legally recognized in Japan. Since the legalization last week, the Japanese Yen has accounted for almost 50% of BTC trading by some estimates. With Russia hoping to have the currency legalized and regulated by 2018, things are looking bright for Bitcoin, which will turn 10 next year.
The fork wars
BTC’s price fluctuations over the years can be attributed to many things, but, outside of government regulation, the biggest thing to pay attention to this year will be the “fork wars.” If you’re not familiar with blockchain(the system BTC runs on), essentially it’s a data storage method that involves linking blocks(technically: bits) of data together across multiple computers. Those bits in the case of BTC can be a maximum of 1MB.
The developers who manage Bitcoin have been arguing since last year about changing the size of a single bit to 2MB. A 2MB bit would allow for more transactions per second, but, would also make many current BTC mining rigs obsolete.
For a 2MB block to be implemented, Bitcoin would have to go through what is called a hard fork. A hard fork means that everyone mining Bitcoin would need to make the switch for it to take full effect. If a significant amount of people refuse to adopt the change, BTC will technically merge into two currencies, Bitcoin, and Bitcoin Classic. If the hardfork is implemented and the currency is split in two, it could have a catastrophic effect on the price of BTC globally.
Push for privacy
Earlier this year the Open Bitcoin Privacy Project(OBPP) gave Bitcoin yet another failing grade. The transparency of BTC that most of its users love also makes it exceptionally risky to use. If the currency hopes to continue its push into mainstream use, developers will need to find a way to increase privacy and security for its users.
Greater retail adoption
From K-Mart to Overstock.com and even Subway, Bitcoin has made some major strides in retail adoption over the past couple years. Now that Japan has legalized the currency, its estimated BTC will be accepted in upwards of 260,000 shops in the country by this summer. If all goes well in Japan, it will be a major building block for BTC going mainstream in other countries. It also lends some credence to estimates that the currency could reach upwards of $3000 per unit this year.
What goes up must come down right? Things are looking really good for Bitcoin at the moment, but, as anyone in the scene will tell you, the price could come crashing down at any moment.
While we may not know where the price of Bitcoin is headed or how the fork wars will end, one thing is certain, the price of BTC will not be stabilizing anytime soon.
[And for the bold(and lucky), there’s some serious money waiting to be made.]