Bitcoin is a peer-to-peer currency system. This electronic currency is based on the concept of a decentralized ledger. This means that unlike the legal tender issued and regulated by the government of a country, Bitcoin is not regulated by any authoritative body. Instead, it uses a public ledger system. In the public ledger system, the transaction history of every Bitcoin token in circulation is accounted for.
The public ledger system is the public blockchain. The blockchain is accessible to all the computer networks (also known as ‘nodes’) that are deployed for the mining operation. All the miners can simultaneously audit and record transactions, and update the blockchain by creating new blocks. Due to the universal accessibility of the ledger across the Bitcoin computer network, transactions can be completed in a matter of seconds. The traditional ledger system used in banks usually takes a few days for the completion, approval of any overseas transaction. It is for this reason cryptos such as Bitcoin are a preferred mode of transaction when it comes to making large transactions across borders.
When someone with a crypto wallet (wallets can be created through applications such as Bitcoin Fast Profit trades with another account, this process is audited and approved by the miners. The miners on computing complex mathematical equations are able to approve a transaction. The transactions are recorded as blocks. These block are stored in a consequential order within the blockchain. This process of updating the blockchain with a new addition is called ‘mining’. Through mining, the miners are able to earn new Bitcoins as a reward. This is how new Bitcoins are created.
Recently with the latest investment of 1.5 billion USD by tech mogul Elon Musk, Bitcoin has been on the news once again. The price of a single Bitcoin has surpassed the 50,000 USD mark, and estimated to reach the 100,000 USD mark before this year ends. Since crypto is trending once again, let us discuss the illusions and misconception that surrounds Bitcoin at this moment.
Illusions surrounding Bitcoin
- Since Bitcoin is a store of value like gold and other valuable commodities, people use Bitcoins for speculation. They invest legal tender in the currency in order to earn a profit. However, despite what is commonly believed, Bitcoin is not just used for speculations. It is also used as currency for investment and exchange. Tesla accepts payment via Bitcoin. A number of financial institutions like JP Morgan have invested in BTC to make cross-border transactions more efficient.
- It is said that Bitcoin wastes a great amount of non-renewable energy and that it consumes as much power as an entire nation of Chile requires, in order to run those high-powered nodes that compute Bitcoin transactions. This is a wrong way of looking at technology. Any new technology, starting from motor vehicles to social media such as Facebook and Instagram utilizes a lot of energy to operate. The energy used by Bitcoin is not wasted since its utility is much higher than the negative impact it has. Today almost 40% of the entire power supply for the Bitcoin network comes from renewable sources. Developers should work towards making cryptos more eco-friendly and sustainable.
- It is believed that the government of every nation is against Bitcoin, as they do not have any regulatory power over it. While it is true that countries like Belarus, Russia are cautious about the utility of Bitcoin. China has banned Bitcoin and crypto trading platforms. The skepticism is not universal. In MIT courses are integrated into cryptocurrency technology. Countries like Canada and America prioritize the economic stability of the nation, which is why they have allowed cryptos to function independently within their borders.
- It is also said that Bitcoin is a poor store of value due to its volatile and unpredictable market trends. It has to be remembered that even the value of gold was unpredictable after it was disincorporated from the monetary system. It is true that compared to bonds and deposit facilities offered by government banks, cryptocurrency is indeed a volatile asset. However, it is known that the chances of return are higher when the assets are volatile.
Despite all the misconceptions and rumors floating around, it has to be acknowledged that Bitcoin has definitely created a new infrastructure for transactions in the digital age. It has made the network more accurate, reliable, and much more efficient than the traditional banking system in many aspects.