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5 facts about Bitcoin

bitcoin

Last December 2015, the news was full of excitement after the identity disclosure of Satoshi Nakamoto. This guy who’s supposed to be the Bitcoin father would in fact be an Australian businessman called Craig Steven Wright.

But what is exactly this virtual currency that everyone is talking about?

Here are 5 facts you need to know about Bitcoin to better understand this shadow currency.

Bitcoin overview

The term Bitcoin is composed of 2 words : “coin” referring to the currency and “bit”, the binary computer unit of measurement. It means a virtual currency, which has its origin in a software program, designed in 2009 by one or more programmers, hiding behind the pseudonym Satoshi Nakamoto. His identity is one of the biggest mystery and has been written about extensively.

Unlike physical currency such as the euro or the dollar, the bitcoin is not governed by any central bank or government, but by a wide variety of users.

Like all other currencies, bitcoin can be exchanged in exchange of services (pay the fare of a taxi, for example), products or even other currencies, as long as the other transaction party accepts the principle. Thousands of web sites and even some “real” shops now use it.

The advantage? There are no transaction costs in the absence of bank intermediaries and payments are made wthin a few minutes.

With over 500 existing virtual currencies in the world, the bitcoin represents about 90% of the market.

Where can I get bitcoins?

deskTo get bitcoins, a simple computer is enough, even if the operation seems reserved for specialists with higher financial resources due to the computing power required. Once the free software is downloaded, create this currency called “mining” can begin.

Then bitcoins prospector joins a network of tens of thousands of computers in the world. His mission: to resolve successive equations that allow him to be rewarded for success by bitcoins recently created.

This encryption ensures security of transactions and the ability to trace all exchanges made since the creation of the currency. The algorithm follows a decreasing curve until the amount of bitcoins today 15.25 million, reaches 21 million units.

Bitcoin value

Since its birth, it has been subject of significant fluctuation movements. For information, a bitcoin is worth about 435 dollars at this end of February, according to the CoinDesk Index, which is the average price on the principal exchange platforms. But it peaked at over $ 1,000 in the fall of 2013, against a few cents to launch. This extreme volatility drew many critics, who denounced the creation of a speculative bubble.

An uncertain future

Bitcoin has earned a bad reputation due to its lack of transparency, after the platform MtGox bankruptcy in 2014, and its use in criminal cases. The website Silk Road, nicknamed “the eBay of drug dealing”, closed now by US authorities, used it as currency.

Used according to critics to all illegal traffic due to the anonymity of payments, bitcoin is also, in its current form, vulnerable to theft or other fraudulent operations.

Some countries have already taken action: Russia made its use illegal and many countries are considering regulating the use.

Bitcoin and financial markets

Since 2013, the Chinese influence has grown steadily. It should nevertheless be noted that the bitcoin is outlawed on this market.

However, even if the use of bitcoin is prohibited on the Chinese side (that is to say, it is impossible to use it for shopping), it is possible to speculate on this digital currency which has a particularly attractive price in China.

Anyway, even if the Chinese market is without doubt the most voluminous, it is still the United States leading the way. This is indeed the land of Uncle Sam which is used as a reference. The dollar’s influence remains undeniable: when the dollar improves, the bitcoin follows.

This is probably the effect of the European economy perspectives in terms of funding and innovation. In all cases, it must be emphasized that it is Wall Street that is the financial epicenter of bitcoin rather than Beijing.

But will Wall Street remain the financial epicenter if Bitcoin moves into higher gear and China take opportunities?

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About the author

François Van Laeys

François Van Laeys

Web marketing manager within Softcorner, second hand software market place while following Grenoble Management School Master's in Digital Business Strategy.