Modern societies rely entirely on large intermediaries, such as banks, to build trust in their economies. In general, they have done a good job fulfilling their function. However, there are problems stemming from old business models clashing with the new technology. Inherent in the old model is centralization, which is buckling under its own weight.
In 2009, Bitcoin was released anonymously following one of the biggest financial shocks in history. It is a digital cryptocurrency that is not regulated or issued by any government or private entity.
Although it has very little intrinsic value and was originally worth pennies on the dollar, there is great interest in its underlying block-block technology because of its decentralized and pseudonymous nature.
Bitcoin can be bought through an online exchange using traditional currency, either total or in fractions.
A digital wallet is needed to safely store Bitcoin due to the possibility of online exchanges being hacked. Private wallets allow users to store Bitcoin and securely create backups on a smartphone or offline.
Bitcoin was the world's strongest currency in 2010, 2011, 2012 and 2013, surpassing even gold. In 2014 it was the worst performing currency in the world.
The bullish trend continued in 2015 and 2016. It is currently priced at $ 700 per Bitcoin, well below its 2013 high of over $ 1,200.
Bitcoin's purpose is to establish trust and allow transactions through a global ledger, specifically without the need for a third party. Trust is created through peer-to-peer collaboration and cryptography rather than a singular authority figure. Each transaction is shared across millions of computers.
Blocks are calculated and extracted every 10 minutes with an updated list of transactions. These are linked together to form a chain of time blocks that represent the entire history of the block chain. This is a smart tactic against hackers, who would have to compromise all computers in the chain of locks using high levels of cryptography while everyone is watching.
Bitcoin's "miners" provide their computing resources to make the system work. In return, they receive Bitcoin. The blocks increase in complexity and halve their size in a programmed way. This disinflation process increases the amount of energy needed to complete future calculations.
Many people have pooled their resources together and contribute to a framework that allows new privacy tools like Bitcoin to be open to criticism, which is needed for innovation. It is this global network of developers making continuous adjustments and improvements to the functionality of Bitcoin.
It is important to note the lack of confidentiality when it comes to Bitcoin, even though real identities are not tied to any block chain. It is not totally anonymous, although attempts to make it more private are currently being developed by an energetic community. Addresses can still be linked to other transactions.
By residing entirely in the public domain, there is no point of authority that a government can intimidate and coerce into submission through laws such as FISA and threatening threats of prosecution.
Therefore, Bitcoin has been unfairly qualified through illegal activities such as hacking and portrayed as anti-government, but these labels do not have the most basic point, which is that it allows people to have total control of their own activity Financial.
"Although modern networks have facilitated the use of the aging financial infrastructure, particularly in a digital context, they have not created new infrastructure," writes Spencer Bogart, author of a September 22 report from Needham & Company, an investment banking and Assets Management company.
"Bitcoin, on the other hand, is a new infrastructure for the exchange of digital value," writes Bogart.
Read the Forbes eBook "Secret Money: Living in Bitcoin in the Real World".
"The price of Bitcoin benefits from two main sources of demand: its value as a 'digital gold' and its usefulness as a payment channel."
The investment report also shows that Bitcoin's liquidity has been growing as its volatility has declined. Its daily price volatility is now comparable to oil and has fallen even below popular Internet IPOs.
Emerging markets in developing countries have been particularly fond of Bitcoin due to a combination of unstable currencies and more financial crises.
Capital controls and the excessive costs of cross-border transactions also make Bitcoin more attractive as a quick, low-cost alternative.
