The financial recession occurred in 2008 demonstrated the weaknesses of major currencies, and the fact that not even the most solid companies of the world are not spared of financial problems, problems appeared because of inflation and financial speculations. Even the mighty US dollar and the Euro proved their instability, showing the necessity of new payment methods. While the New York market was about to collapse, inducing a wave of shock in the entire financial world, at the other side of the planet, in Japan, Nakamura Satoshi was just about to complete his project, the Bitcoin, which is now one of the most contested, debated and praised ideas on the internet.
History and characteristics of Bitcoin – BTC
Nakamura Satoshi cared about his privacy, so we don’t even know if this is his real name, or if this is only an alias. The fact that Satoshi is mysterious about his identity brought some circumspection about this coin, and during its first years of existence, the currency was ignored by many, especially because of this reason. However, the utility and usefulness of this virtual coin convinced many people that this might be the next revolution in internet payments. Let’s see why.
Bitcoin is used exclusively for internet transactions, being a way to transfer money with minimum costs in any part of the world. Even if it is a virtual currency, it has an “image”, represented by a B, doubled bytes 0 and 1, with the Latin quote “In Virtus Numeris”, which means “By the high virtue of numbers”. This quote was not chosen randomly. Each transaction is secured and anonymous, as it is made by generating prime numbers, and then it is encrypted and decrypted using the anonymous bitcoin addresses, which are case sensitive alphanumeric strings (a principle “borrowed” from Linux), with a length of 24-30 characters.
The act of processing a transaction using the computer for a third party (which does not know what transactions are processed, as those are encrypted and grouped in blocks of 1000) is paid work by generating new bitcoins.
The principles of Bitcoin: why it is expected for its value to grow?
During the first four years since the bitcoin was launched, a processor received 50 BTC for each block that is processed correctly, and from 2013 to 2017, the processors would only receive 25 BTC for the same work. The payment is halved once every four years, until 2033, when the number of bitcoins will reach 21 million, the cap established by Satoshi in 2009.
This will provoke an accelerated appreciation of bitcoin, in a hyperbolic deflationist spiral. When it was launched, the bitcoin had a value of 1 cent, and after a week, its value was of 9 cents. At the beginning of 2013, the value of a bitcoin was of 73$, and the value grows with amazing pace. This means an appreciation of 1359900% during the first four years, with perspectives of even bigger and more spectacular growths.
Until 2013, the bitcoin was appreciated at its true value only by internet users, hackers, and internet financial passionate users. The Cyprus crisis brought the bitcoin its worldwide recognition. When the savings of Cypriots were threatened by governmental measurements, people from all over the world that had their money placed in Cypriot banks preferred to transfer their economies in bitcoins. This accelerated the number of transactions, helped by the fact that national currencies of many countries entered in a process of accelerated inflation. Another advantage considered by people using bitcoin as a method to preserve values, is the fact that the transactions are anonymous, so the value of the bitcoin is of no importance. This way, you can send money from Iran to UK, without being worried that the MI5 will knock at your door to check if you are a terrorist.
As a general principle, the value of the bitcoin grows when it is used, and it shrinks when it is not used. The beauty of the principle is that the value of a bitcoin could reach infinity, especially after 2033, when the number of bitcoins on the market would reach 21 million.
During its first years of existence, the bitcoin was considered as an exotic and weird currency, used by drug dealers and dubious businesspersons for money laundry. Even Satoshi was accused that he has connection with some dangerous hackers, the case being brought in the attention of the US general prosecutor. For a while, the bitcoin was a discrete currency used to pay diverse services and products online. It can be bought from some online currency exchange houses, using a diversity of international currencies, such as the US and Canadian dollars, Euro, GBP and even Russian Rubles. Any person that has a powerful computer can generate bitcoins, the reserve of this currency being managed by a program working under some complex mathematic algorithms.
The fascinating aspect about it is that its value grows when it is created, which is against the general principle of economy. Usually, when a government decides to print money, an inflationist spiral is inflicted, while the bitcoin increases its value when it is created.