What is Bitcoin
Bitcoin is a form of digital currency, created and held electronically.
Launched in 2009 after the publication of the bitcoin white paper the year before by anonymous creator Satoshi Nakamoto. The revolutionary global payments network is based on a completely decentralised, peer-to-peer, open source protocol representing a way to move money or value, faster, cheaper and more efficiently than the mediums that are traditionally available.
Bitcoin is one of the cryptocurrencies with asset attributes different from other major asset classes. The three main characteristics include the potential to invest in bitcoin as an investable product; the fact that it can be used as a medium for payment, though not one backed by any sovereign state; and its ability to be used to move around value. Bitcoin is a network that is able to tokenise brand new assets or create token versions of physical world assets and move them around in a virtual world.
Bitcoin works through blockchains, enabling the sharing of information that has been traditionally siloed. With bitcoin, everyone can have a copy of a specific set of information, transactions, and records, so when changes are made to a specific set of records, that will be readily available to that subset of the network. The digital trading platform operates 24/7.
Use of Bitcoins
The growing use of bitcoins is leading to entrepreneurial innovation and changes in traditional banking infrastructure. Once the infrastructure is built and there is mass distribution of the currency, new businesses can build financial services without having to invest in expensive infrastructure, all that will be required is to build applications and supportive services without the need for a data centre, massive hardware, and an IT department.
Bitcoins future
Bitcoin has grown fast since its inception.
With a hard limit of 21 million bitcoins (BTC) to be generated by 2140, a lot of people assume there are still a lot of coins to be mined for the next few years. While that is true up to a certain extent, it is estimated that by January, 2018 eighty percent of the finite supply will have been brought into circulation already.
To date, it remains a little unclear what impact this will have on the price of each individual BTC, though as mining becomes more difficult and less profitable (unless continuous new investments take place) the price per existing bitcoin should go up in value. Some analysts have suggested the value will rise anywhere from USD100,000 to USD 1 million.
It is also worth bearing in mind that the 4.2 million bitcoins to be generated after January 2018 will take place over the course of nearly 122 years, creating a predicted increase in the demand for bitcoin. However, neither of these factors are yet guaranteed, as the cryptocurrency market does not operate like more traditional models.
While the future is uncertain, the eighty percent milestone could force some miners to shut down their operations as major mining difficulty spikes is a trend already begun and expected to continue for some time since a higher mining difficulty requires more hash rate power and electricity to mine the same amount of bitcoin. January 2018 may be a time when a lot of miners will have to stop.
If there are fewer miners, it is expected the mining hardware manufacturers will take an even larger stake in the bitcoin mining process. With more energy-efficient hardware still being developed, it is likely a certain degree of centralisation will occur in the mining world. The final 5 percent (1.05 million bitcoins) could prove to be challenging, as the trade-off between costs and earnings will make it seem far less attractive to do so and as it will take a very long time to mine the last BTC, if it happens.
The coming year could become a very important one for Bitcoin as a whole, even without guarantees or certainties. We will be tracking changes both positive or negative.
