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Bitcoin's popularity and price are unbelievable as it continues to trade at its all-time high, and its price has surged over 305% in the past year. It was the first cryptocurrency or digital currency that was launched back in 2009. Bitcoin was developed to provide people access to digital money on tassels of the economy. Since it has entered the mainstream, it has been widely used as a medium of exchange and also referred to as digital gold. If you want to know more about bitcoin trading visit this website.
Bitcoin is recognized as a digital asset because it is a scarce digital asset. Due to covid-19, there was a huge risk of economic collapse, and this is why governments across the world flooded the markets with fiat money to boost spending power and save the economy. But the increased supply of fiat money has resulted in inflation, and it grinds down its value. Bitcoin is preferred more by people because it acts as a hedge against inflation, and people are stockpiling their money in bitcoin due to fear of inflation.
Let's read about the basics of bitcoin and understand what it is.
What is Bitcoin?
Bitcoin is the world's largest and most popular cryptocurrency in terms of its market capitalization. It is popular because of its limited supply, making it equivalent to a precious, valuable asset. Bitcoin's supply is fixed, and there could be a maximum of 21 million bitcoins. This limit is already set in the computer code of the bitcoin protocol, and no one can change it. Its limited supply creates an artificial scarcity that makes sure that digital currencies' value increased with time. Digital currencies are completely different from fiat currencies as those are government-issued currencies that have an unlimited supply and are generated or printed anytime when required. Due to the fixed supply of bitcoin, it can't be inflated by any political or economic decisions.
It is the only cryptocurrency traded much on crypto exchanges, but these digital currencies are stored in digital wallets on smartphones or hardware. Crypto exchanges allow users to buy and sell bitcoins, whereas digital wallets are storage spaces that allow users to send, receive and store digital currencies. The most astonishing and groundbreaking aspect of bitcoin is that it uses cryptography and is based on the work of computer scientists and cryptographers. The Bitcoin network is completely dependent on the blockchain, an immutable public database that records all the bitcoin transactions.
A decentralized digital currency
Bitcoin is a decentralized currency. In simple words, bitcoin funds through a distributed peer-to-peer network instead of depending on central authorities like central banks or government for its working. Bitcoin network achieves this decentralization through bitcoin miners. Miners are the main contributors that run software to verify and validate the bitcoin transactions on the blockchain. Miners are the highly active and engaged people that handle and monitor crypto transactions.
In return, miners are rewarded with bitcoin for solving a block of transactions every 10 minutes. The miners are assigned 10 minutes to verify and validate the block of transactions where all miners compete, and one who solves the puzzles first is awarded a block reward. The reward is set to get halved every four years. The creator makes a protocol of the bitcoin network, Satoshi Nakamoto, where he set the block reward to be halved, and this also increases the complexity of mathematical puzzles.
Why Bitcoin Matters?
Safe asset
People invest in bitcoin to diversify their investment assets. The market value of bitcoin can be compared to gold and other valuable assets. Amid the global pandemic, where the globe is facing uncertainties, people are taking shelter under bitcoin as it is a safe asset and a great alternative to fiat currencies.
Based on privacy-oriented ideologies
It is a fact that bitcoin isn't ideologically and politically neutral. Bitcoin was born of the internet era, which has also become a major privacy concern. Bitcoin is an anonymous digital currency that allows users to transfer digital money over the internet without being tracked by banks and governments. It is a great alternative for people who distrust the central banking system.